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 even if they do not have a current FHA Loan. Whether you have a FHA Loan, VA Loan, USDA Loan, or Conventional Loan, you can refinance into FHA 203k Loan and the new FHA 203k Loan with pay off your current mortgage loan balance and you will get a new home loan that covers the existing mortgage of your home plus the cost of the renovations all in one loan and closing.
What Is A FHA Loan?
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 residential mortgage loans FHA insures are originated, processed, underwritten, and funded by private mortgage lenders such as banks and mortgage bankers who are FHA approved and follow FHA mortgage lending guidelines. In order for FHA to insure mortgage loans originated and funded by FHA, the mortgage lender needs to meet all of HUD’s lending guidelines and if they do not, then the FHA Loan is not insurable in the event of borrower default.
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 which limits the construction budget to $35,000 and no structural changes can be done or room additions and the Full FHA 203k Loan Program which 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
When homeowners think about doing major repairs to their homes, 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 and involves a lot of red tape. Second mortgages and home equity lines of credit require equity and lower loan to values and most banks require credit scores of higher than 700 FICO. The best solution to get a construction rehab loan to renovate your home is to refinance into FHA 203k Loan. You can refinance your current Conventional Loan, FHA Loan, USDA Loan, or VA Loan into a FHA 203k Loan, whether it is a FHA 203k Streamline Loan or a Full FHA 203k Loan.
What Are The Minimum Requirements To Refinance Into FHA 203k Loan From My Current Home Loan?
Refinancing your current mortgage loan into a FHA 203k Loan is easy. You need a minimum credit score of 580 FICO, 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 FICO. FHA 203k mortgage loan applicants with credit scores under 620 FICO, 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 a bankruptcy discharged date to qualify for a 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 mortgage lender so as long as you get an approve/eligible per DU FINDINGS, you are good to go. For more information on how to refinance into FHA 203k Loan from any other loan type, contact Gustan Cho Associates at 262-716-8151.