Refinance Into FHA 203k Loan From Any Other Loan Type

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This BLOG On Refinance Into FHA 203k Loan From Any Other Loan Type Was UPDATED And PUBLISHED On January 8th, 2020

Can I Refinance Into FHA 203k Loan If I Do Not Have FHA Loan?

Homeowners who are in need of either basic rehab or need to do a full-blown renovation project on their homes can refinance into FHA 203k Loan. This holds true even if they do not have a current FHA Loan.

  • Whether homeowners have an FHA Loan, VA Loan, USDA Loan, or Conventional Loan, they can refinance into FHA 203k Loan
  • The new FHA 203k Loan with pay off homeowners current mortgage loan balance
  • The homeowner will get a new home loan
  • The new home loan covers the existing mortgage of home plus the cost of the renovations all in one loan and closing

In this article, we will cover and discuss Refinance Into FHA 203k Loan From Any Other Loan Type.

What Is The Role Of HUD

What Is Role Of HUD

FHA, which stands for the Federal Housing Administration, is part of HUD, which is the United States Department of Housing and Urban Development.

  • FHA is not a mortgage company nor does it fund any residential mortgage loans
  • FHA’s mission is to insure mortgage loans that meet HUD mortgage lending guidelines
  • The loans FHA insures are originated, processed, underwritten, and funded by private mortgage lenders
  • HUD insures private lenders such as banks and mortgage bankers who are FHA approved and follow FHA lending guidelines
  • In order for FHA to insure loans originated and funded by private lenders, lenders need to meet all of HUD’s lending guidelines

If they do not, then the FHA Loan is not insurable in the event of borrower default.

What Is A FHA 203k Loan?

What Is A FHA 203k Loan?

FHA has an acquisition and construction loan program for owner-occupied one to four-unit residential properties which a home buyer can purchase and rehab all in one loan.

There are two types of FHA 203k Loan Programs:

The FHA 203k Streamline Rehab Loan:

  • limits the construction budget to $35,000 and no structural changes can be done or room additions

The Full FHA 203k Loan Program:

  • there is no limit on the construction budget and major renovations such as changing the structure and room additions are allowed

All FHA Loans and FHA 203k Loans require a 3.5% down payment on a home purchase.  For FHA 203k Loans, 3.5% of the after improved value of the property is required.

Second Mortgages And Home Equity Lines Of Credit

Second Mortgages And Home Equity Lines Of Credit

When homeowners think about doing major repairs to their homes, the first thing they think about is getting a construction loan, second mortgage, or home equity line of credit.

  • Unfortunately, construction loans on residential homes are rather difficult to get
  • Involves a lot of red tape
  • Second mortgages and home equity lines of credit require equity and lower loan to values
  • Most banks require credit scores of higher than 700
  • Debt to income ratios are normally capped at 43% DTI
  • The best solution to get a construction rehab loan to renovate a home is to refinance into FHA 203k Loan
  • Homeowners can refinance current Conventional Loan, FHA Loan, USDA Loan, or VA Loan into an FHA 203k Loan

This holds true whether it is an FHA 203k Streamline Loan or a Full FHA 203k Loan.

Minimum Requirements To Refinance Into FHA 203k Loan

Minimum Requirements To Refinance Into FHA 203k Loan

Refinancing current mortgage loans into an FHA 203k Loan is easy.

  • To qualify, borrowers need a minimum credit score of 580
  • Debt to income ratios are capped at 56.9% back end debt to income ratios and 46.9% front end debt to income ratios for borrowers with credit scores higher than 620
  • FHA 203k applicants with credit scores under 620, the debt to income ratios are capped at 43%
  • Maximum loan to value is 97.75% on the after improved value
  • There is a two year waiting period after bankruptcy discharged date to qualify for an FHA Loan which also includes FHA 203k Loans
  • There is a three year mandatory waiting period after foreclosure, deed in lieu of foreclosure, and short sale to qualify for any FHA Loans which includes FHA 203k Loans
  • We are a no lender overlay national direct lender
  • As long as borrowers can get an approve/eligible per DU FINDINGS, we will approve and close borrowers loan

For more information on how to refinance into FHA 203k Loan from any other loan type, contact Gustan Cho Associates at 262-716-8151 or text us for faster response. Borrowers can also email us at gcho@gustancho.com.  The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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