FHA 203k Loan
Home buyers who want to purchase a fixer upper or homeowners who need to remodel and rehab their homes can now do so with a FHA 203k Loan. Homeowners who have either a conventional loan, VA Loan, FHA Loan, USDA Loan can refinance with FHA 203k Loan. FHA 203k Loan borrowers can use a FHA 203k Loan pretty much for any type of rehab. From kitchen remodeling, bathroom remodeling, new flooring, basement remodeling, attic remodeling, new windows, new roof, new gutters, new siding, new driveway, new porches, new decks, new room addition, second floor addition, replacing heating and air conditioning systems, new electric, new plumbing, new millwork, painting, and pretty much every type of home improvement repair that they can think of including tearing down and rebuilding a new home on an existing foundation.
Using Second Mortgages For Rehab
When homeowners think about rehabbing their homes, the first thought that they think about is getting a construction loan from a bank. Unfortunately, construction loans are not as easy as they once were and is expensive and time consuming. Plus you need equity in your home in order to secure a construction loan these days. Second option is securing a second mortgage or home equity line of credit and using those funds for rehab. Unfortunately, with second mortgages, most second mortgage lenders require the borrower to have at least 80% equity and will only lend up to 90% loan to value. Most second mortgage lenders also require 700 FICO credit scores from the mortgage loan borrower and no bankruptcies, foreclosures, deed in lieu of foreclosures, or short sale for the past 7 years.
Refinance With FHA 203k Loan Program
If you are a homeowner thinking of doing renovations to your home, consider to refinance with FHA 203k Loan. You can refinance your conventional loan or FHA Loan into a FHA 203k Loan, pay off your existing mortgage and get the construction proceeds to do either minor repairs or do major renovations such as adding on to your current home or just doing basic remodeling projects like updating your kitchen, bathroom, basement, attic, siding, roof, or other minor repairs. There are two different types of FHA 203k Loan Programs. The FHA 203k Streamline mortgage loan has a maximum construction budget of $35,000 and you can use it to do rehab to your home but cannot do any structural changes or room additions. With the full FHA 203k Loan program, there is no maximum construction budget. As long as your home will appraise out after repairs, you can go as high as the maximum FHA Loan limit in your county. Most areas have the FHA Loan limit capped at $271,500, however, if you are in a high cost area like most counties in California, the maximum FHA Loan limits can be as high as $625,500 for single family homes and much higher for 2 to 4 unit properties.
FHA 203k Loan Requirements
FHA 203k Loans are considered higher risk loans than standard FHA Loans. Higher risk means higher mortgage rates. Mortgage rates on FHA 203k Loans are normally 0.50% higher than standard FHA Loans. FHA 203k Loan Requirements are the same as with standard FHA Loans. Mortgage Loan Borrowers needs a minimum of 580 FICO credit scores, 3.5% down payment, and no late payments in the past 12 months. Two year waiting period after the bankruptcy discharge date, three year waiting period after foreclosure, deed in lieu of foreclosure, and short sale. Maximum debt to income ratios are capped at 56.9% if your credit scores are higher than 620 FICO and 43% if your credit scores fall below 620 FICO credit scores. Gift funds from family members are allowed to use it towards down payment and 100% of the down payment can be gifted.