FHA 203k Loans

FHA 203k Loans is a acquisition and construction/renovation loan all combined in one loan where a home buyer can purchase a fixer upper or unhabitable home that is in need of rehab with a 3.5% down payment on the after improved value.  A home buyer can pretty do any type of rehab with a FHA 203k Loan.  There are two types of FHA 203k Loans.  The first and most popular FHA 203k Loan program is the FHA 203k Streamline Loan which limits the construction loan amount to $35,000.  You can do any type of repairs with a FHA 203k Streamline loan such as kitchen remodeling, bathroom remodeling, basement remodeling, attic remodeling, new floors, new windows, new roofing, new appliances, new furnace systems, new air conditioning systems, painting, and other types of remodeling.  However, you cannot do any structural changes and/or modifications to the home and you cannot do any types of room additions.

The second type of FHA 203k Loan is the full FHA 203k Loan which there is no maximum construction budget amount and you can do any type of construction including structural changes to the home as well as room additions.  Mortgage rates on FHA 203k Loans are higher than standard FHA Loans due to the layered risk factor.

What Types Of Properties Qualify For FHA 203k Loans

Only owner occupant home buyers can qualify for FHA 203k Loans.  Second home buyers and investment home buyers cannot qualify for FHA 203k Loans.  Any one to four unit residential property can qualify for FHA 203k Rehab Loans including condominiums and townhomes.  Manufactured homes on a solid concrete foundation can qualify for FHA 203k Loans.  Mortgage rates on 203k Loans for two to four unit properties are higher than mortgage rates on 203k Loans that are single family homes due to the layered risk factor.  Multi unit properties are classified as higher risk investments by FHA mortgage lenders so mortgage rates on 203k Loans that are 2 to 4 unit properties are higher.  Condominium mortgage rates on FHA 203k Loans are higher than single family mortgage rates on FHA 203k Loans because condominiums are classified as higher risk properties than single family homes.

How Much Higher Are Mortgage Rates On FHA 203k Loans?

Mortgage rates on FHA 203k Loans are higher than standard FHA Loans because mortgage lenders view buying a fixer upper as higher risk than a home that does not need any repairs.  Mortgage rates on FHA 203k Loans that are used for two to four unit properties are yet higher than mortgage rates on FHA 203k Loans that are used for single family homes.  Two to four unit properties are classified as higher risk than single family homes.  Condominiums are also viewed as higher risk than single family homes.  Mortgage rates on FHA 203k Loans are normally 0.50% to 0.75% higher than standard FHA Loans.

Qualification Requirements For FHA 203k Loans

A home buyer or homeowner needing refinance can qualify for a FHA 203k Loan with a 580 FICO credit score and a 3.5% down payment.  Again, mortgage rates on FHA 203k Loans are higher than standard FHA Loans so it is best recommended that FHA 203k mortgage loan borrowers get their credit scores maximized before starting the FHA 203k Loan Program.  If you need a FHA 203k Mortgage Lender with no overlays, please contact me at 262-716-8151 or email me at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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