The FHA 203k loan is a great product that allows to obtain mortgage financing that can include funds for the costs of repairs and upgrades to a home. There are many factors and details that go into FHA loan, but I want to give an overall synopsis of the product.
Most often, the FHA 203k loan is used for purchase and repair. This becomes a necessary product when a potential home does not meet minimum property standards. Lenders will require that all homes be in good condition and have all component in good working order. If your house had a leaky roof or heating system that was in disrepair, that home would not be eligible for financing. I have seen this program grow over the last couple of years. In my market, a home may sit vacant for some time and become in disrepair. The ability of a realtor to sell these homes as-is are very limited. You would need an all cash buyer or someone with some private financing. However, with a FHA 203k mortgage loan whether you are resident of Queens, Brooklyn or Staten Island NY the pool of potential buyers become greater.
A FHA 203k loan would allow you to borrow money to purchase the home across Long Island, Bronx, Manhattan NY and also finance the costs to make these necessary repairs. All work must be done through a licensed contractor and inspected by an FHA inspector to make sure the work is done properly and at correct timeline. The value the home is based on is the value of the home post repairs.
The 203k renovation loan can also be used for upgrades as well. An example would be an older home that was in good condition but was outdated. You could obtain funds to purchase the home and finance a kitchen renovation or install new windows. Typically upgrades are fine as long as they are not a luxury upgrade.
I have seen this product increasing in popularity due to the lack of construction financing. In years past, you may have seen someone buy a house and demolish it to make way to build a new house. That’s great if you can find construction financing, but that product has really dried up during the mortgage implosion. More and more people are turning to the FHA 203k mortgage to renovate existing homes to today’s current standards.
After the Sandy hurricane, many homeowners across Long Island, Queens, Brooklyn, Staten Island and Manhattan NY who were under insured or were struggling to get their insurance money were able to use FHA renovation loan to get back in their homes. They could refinance their existing mortgage and get the monies they needed to complete the necessary repairs. It was a great option for those who needed to get back into their homes quickly.
The downside to the 203k rehab as with all FHA loans is that it comes with mandated FHA mortgage insurance. The FHA MIP program can be expensive at times, but with today’s lack of mortgage options this is still a great choice for those that need the program. As with standard FHA loans, the minimum down payment to buy a house is still 3.5% which gives many homebuyers the flexibility they need in today’s ever changing real estate market.
Remember, this is the overview of FHA 203k mortgage loans and there are some finer detail points on this product. If you are interested, I suggest you fill out the form or call one of our loan officers today, and they will discuss your options.
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