FHA 203k Program

Right now, with lenders being more frugal with loans than ever before, FHA loans are about the only way to get into a home with less than the 10-20% down payment being required by other lenders.  With an FHA loan, you will currently need 3.5%  of your own funds for a down payment, but even the origin of those funds have some flexibility, i.e. gift from a loving relative, your 401k program, or just your documenting that you have the ability to save the money prior to closing.

Well now, this sounds like FHA loans are the answer to mortgage scarcity.  There is a catch to FHA loans, and for that matter to any funds backed by the government, i.e VA, USDA.   The home that you are interested in must meet FHA standards, which include structural, mechanical, health and safety concerns.  The major components of the home (furnace, roof, water heater...) must have at least 5 years of live remaining.  The home must meet wheatherization minimum standards such as insulation, storm windows even a crack in the window can disqualify the home.  So, for many reasons, the home that you would love to buy may not quality for a loan, and if you are determined to buy this home, all of the issue MUST be corrected prior to closing.  Who pays for the repairs/improvements, and who is going to scrape and paint where the paint is peeling?

Don't give up hope.  FHA came up with the 203k exactly for this situation.  Essentially, you can get an additional $35,000 to cure any of the issues that would prevent the home from qualifying.  No; you may not fund a shopping trip.

The streamlined program is intended to facilitate uncomplicated improvements to a home for which plans, consultants, engineers, or architects are not required.  The program allows for improvements/repairs to roof, gutters, HVAC systems, plumbing, electrical, painting, weatherization, basement waterproofing, re-siding the exterior, and septic and well replacement just to name a few. 

You may not use the funds for new construction, repair of structural damage, landscaping, or improvements requiring a work schedule longer than six months.

The work does not have to be completed prior to closing.  There is a specialize home inspection (a home inspector that is approved for this program) required.  You will work with your lender on getting contractor proposals and an appraisal, which shows the value "as improved".

The biggest thing to remember is that not every lender understands the first thing about FHA loans let alone the 203k program, so ONLY work with a lender that has specific knowledge.

Let me know if you need a lender - I have one that I think is the best.  As always, please feel free to email me or I'd love to have you check out our website.