FHA 203K Home Loans
Federal housing administration is an integral part of the department of housing and urban development (HUD) which looks after various mortgage insurance used by single families. Such programs work on basis of approval of the buyer’s property and credit through FHA-approved lending institutions. This program is the department’s key program for the rehabilitation and restoring of single family properties. This program helps in expansion of homeownership opportunities and revival of neighborhoods. HUD firmly supports this program and lenders participating in it since this program’s objective are similar to HUD’s goals. Many lenders have completely utilized the benefits of this program by combining it with other financial resources such as HUD’s HOME, HOPE and community development block grant programs and by joining hands with the state and local housing agencies to rehabilitate properties. According to HUD this program is also a tremendous opportunity for lenders to show their commitment to lower income communities under Community Reinvestment Act (CRA).
The functionality of this program was created by understanding the needs of a borrower who has to pay the mortgage before the complete rehabilitation of the property is done. With the creation of FHA section 203(k) now the borrower has the facility to take just one mortgage loan at long term fixed or adjustable rate, in order to finance both acquisition and rehabilitation of the property. For Rehabilitation purpose the mortgage amount provided is based on the projected value of the property with the work completed and taking into consideration the cost of the work. There is a provision for mortgage loans endorsement by HUD as soon as the mortgage proceeds are distributed to lessen the risk to the mortgage lender.
For the borrower to be eligible for applying for this program certain conditions are required to be fulfilled which are:
1)The property on which the loan is to be sanctioned should be a 1-to-4 dwelling that has been completed for a minimum of one year.
2) For homes which have been demolished or will be raised as a rehabilitation work can be eligible only if some of the foundation system remains intact.
Improvement or Rehabilitation of an existing 1-to-4 unit dwelling can be accomplished through this program in one of the three ways:
1) Through purchase of a dwelling including the land on which it is located and rehabilitating it.
2) Through purchase of a dwelling on a separate location and to move the dwelling on the mortgaged property onto a new foundation and then rehabilitate it.
3) Through refinancing of the existing indebtedness and then rehabilitation of such a dwelling.
This program offers the borrower’s the convenience to rehabilitate their homes that need repair with the ease of availing on a single loan that can cover the cost of purchase as well as the cost of renovation.
Bill Cobb, CREA, is an FHA home appraiser with 16 years experience and performs his FHA appraisal specialty in the Greater Baton Rouge Louisiana market. One can also visit his website at http://fhaappraiserbatonrouge.info/ .