Section 203(k) insurance enables
homebuyers and homeowners to finance both the purchase (and refinancing)
of a house and the cost of its rehabilitation through a single
mortgage or to finance the rehabilitation of their existing home.
Section 203(k) fills a unique and important need for homebuyers.
When buying a house that needs repair or modernization, homebuyers
usually have to follow a complicated and costly process. The
interim acquisition and improvement loans often have relatively
high interest rates, short repayment terms and a balloon payment.
However, Section 203(k) offers a solution that helps both borrowers
and lenders, insuring a single, long term, fixed or adjustable
rate loan that covers both the acquisition and rehabilitation
of a property. Section 203(k) insured loans save borrowers time
and money. They also protect the lender by allowing them to have
the loan insured even before the condition and value of the property
may offer adequate security.
For less extensive repairs/improvements, see Streamlined
203(k).
For housing rehabilitation activities that do not also require
buying or refinancing the property, borrowers may also consider
HUD's Title I Home Improvement Loan program.
Section 203(k) insures mortgages covering the purchase or refinancing
and rehabilitation of a home that is at least a year old. A portion
of the loan proceeds is used to pay the seller, or, if a refinance,
to pay off the existing mortgage and the remaining funds are
placed in an escrow account and released as rehabilitation is
completed. The cost of the rehabilitation must be at least $5,000,
but the total value of the property must still fall within the
FHA mortgage limit for the area. The value of the property is
determined by either (1) the value of the property before rehabilitation
plus the cost of rehabilitation, or (2) 110 percent of the appraised
value of the property after rehabilitation, whichever is less.
back to top
Streamlined 203(k) Limited Repair Program
FHA's Streamlined 203(k) program permits home buyers or home
owners to finance up to an additional $35,000 into their mortgage
to improve or upgrade their home before move-in or as a remodel.
With this product, home buyers and home owners can quickly and
easily tap into cash to pay for property repairs or improvements,
such as those identified by a home inspector or FHA appraiser.
back to top
Eligible Customers:
All persons who can make the monthly mortgage payments are eligible
to apply. Cooperative units are not eligible; individual condominium
units may be insured if they are in projects that have been approved
by FHA or the Department of Veterans Affairs, or meet certain
Fannie Mae guidelines.
back to top
Eligible Activities:
The extent of the rehabilitation covered by Section 203(k) insurance
may range from relatively minor (though exceeding $5000 in cost)
to virtual reconstruction: a home that has been demolished or
will be razed as part of rehabilitation is eligible, for example,
provided that the existing foundation system remains in place.
Section 203(k) insured loans can finance the rehabilitation of
the residential portion of a property that also has non-residential
uses; they can also cover the conversion of a property of any
size to a one- to four- unit structure. The types of improvements
that borrower's may make using Section 203(k) financing include:
- structural alterations and reconstruction
- modernization and improvements to the home's function
- elimination of health and safety hazards
- changes that improve appearance and eliminate obsolescence
- reconditioning or replacing plumbing; installing a well and/or
septic system
- adding or replacing roofing, gutters, and downspouts
- adding or replacing floors and/or floor treatments
- major landscape work and site improvements
- enhancing accessibility for a disabled person
- making energy conservation improvements
HUD requires that properties financed under this program meet
certain basic energy efficiency and structural standards.
back to top
Experience extraordinary...
Call Theresa Springer today at 360-210-7984 to
see the difference that working with an experienced home
loan professional can make for you. |
