Page: 1 2 3 4  March 2010 - Page 3 SPECIAL REPORT - FHA 203(K) LOANS How You Can Benefit From A Special Loan To Buy And Upgrade Your Home If you're a first-time home buyer currently in the market -- or you know someone who is -- don't be discouraged by the homes you find that need more than minor repairs or upgrades. Consider distressed properties, or even those that simply need updating or reconfiguring, because there are loans available that allow you to borrow the purchase price and additional funds to renovate in a single mortgage. A 203(k) Rehabilitation Mortgage, from the Federal Housing Administration and Department of Housing and Urban Development, is a loan program that can help you purchase and improve a home with condition issues. (Current homeowners wanting to repair and upgrade their existing home can refinance into the 203(k) loan as well. Call us to find participating lenders.) There are two types of 203(k) mortgages: The Standard 203(k) is for homes that need repairs that involve structural changes including room additions, exterior grading and landscaping or renovations that would prohibit you from moving into the home. Eligible improvements must cost at least $5,000, and typically 203(k) loans are for rehab projects costing more than $35,000. If you are using engineering or architectural drawings and inspections, you'll need a Standard 203(k) loan. The Streamlined 203(k) is a simpler, less costly loan program for homes that require renovations costing less than $35,000, with no minimum repair cost requirement. This program requires fewer inspections and does not mandate use of a consultant, architect or engineer. Typical improvements covered by the 203(k) Streamlined program include: Repair/replace roofs, gutters, downspouts, flooring, septic systems and/or wells Repair/replace/upgrade HVAC, plumbing and/or electrical systems Repair/replace/add exterior decks, patios, porches Replace windows, doors and/or siding Minor kitchen remodeling Interior or exterior painting Weatherization (windows, doors, insulation, weather stripping, etc.) New appliances (free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves) Accessibility improvements for people with disabilities Lead-based paint stabilization or abatement Basement finishing, remodeling and water-proofing (with no structural repairs). FHA 203(k) Home Buyer FAQS How Does A 203(k) Mortgage Open Up My Home Buying Options? A 203(k) loan allows you to.. Consider a larger selection of homes, including those that are foreclosed, distressed or simply in need of updates. Make just a 3.5% down payment. Have a greater chance to qualify for the loan, with more-flexible qualification requirements than conventional mortgages. Save time and money with a single loan for home purchase and improvement -- one application, one closing/settlement, one-time fees. Get a mortgage that is assumable and has no prepayment penalties if you should decide to sell, move up or refinance. Save time looking for a "perfect" home by buying one that you make perfect with your choices of remodeling and repairs. Save money by combining the home purchase price and remodeling costs in one purchase with a lower interest rate than other options available after purchase. What homes are covered in the 203(k) loan programs? Single-family homes are not the only type of building eligible. Townhomes and condominiums can also be purchased with the funds being used for the improvement of the interior only. One-to-four unit buildings can be purchased under the 203(k) loan program. The conversion of a building with a larger number of units down to four or less is also eligible for the loan. What other details do I need to know? Energy Efficient Mortgages (EEM) can also be used with the 203(k) loan, with the total of the EEM mortgage being up to 5% of the value of the property. EEM loans allow more-generous qualifying limits for borrowers because reduced utility bills increase your income's borrowing power.Renovation of the property must begin within 30 days of the closing/settlement of the property, and the total time for renovation cannot exceed six months. If the home is uninhabitable during renovation, the Standard 203(k) allows for up to six mortgage payments to be covered while the home is undergoing work. Streamlined 203(k) loans require that the home be habitable the entire time during renovation. Homeowners can do the renovation work if they demonstrate professional expertise in the type of work planned. However, do-it-yourself homeowners will only be reimbursed for materials used in the renovation, not labor. Page: 1 2 3 4

Back to Scottsdale Real Estate Web Site