Sometimes known as Rehab loans, 203(k) is a loan program through the Federal Housing Administration that is intended to finance both the purchasing and renovation of a home in a single loan. You can refinance and rehabilitate your own home simultaneously without your own personal savings becoming depleted.
The 203(k) has long been a proficient program in the housing market, with influence even in the jumbo renovation, home-style renovation, home-path renovation and even energy efficient mortgage markets. It’s designed to serve various kinds of repairs and renovations, specifically relating to the structure of a property.
A home can be purchased by a buyer and all necessary costs, coveted amendments and renovation projects can be included this single adjustable rate loan that can be also be fixed and long term. Buyers save both precious time and money after submitting their applications through an approved lender through the FHA.
Lenders are also protected by the allowance of the 203(k) being insured, plus the property’s overall value could provide security.
Some lenders can charge a supplemental origination fee and a higher appraisal fee, as well other fees to prepare documents and analyze rehabilitation plans.
There’s no max amount on renovation, plus buyers can redesign a home from the ground up, perform energy efficient enhancements, delete health hazards, improve landscaping and even add or replace roofs, floors and gutters. The United States Department of Housing and Urban Development also offers a consultant to buyers in this program, thus giving an added layer of protection. HUD also calls for properties in this program satisfy its necessary structural standards and energy efficiency requirements.
Mortgages are insured by the ability of the 203(k) to protect the rehabilitation, refinancing or buying of a property that is a minimum of one year. Part of the loan is utilized for the paying of the seller, or existing mortgage in the event of a refinancing. The rest of the capital is placed in an escrow account and becomes available after the completion of rehabilitation.
The 203(k) can cover rehabilitation projects pertaining to demolished homes, non-residential used properties and conversions of one-to-four-unit structured properties.
The minimum loan amount for a 203(k) is $5000, is based on the home’s value and renovations, plus it allows for a maximum LTV of 110%. Yet the total value of the property must be within the FHA’s mortgage limit for its area. For Los Angeles County, the mortgage limit for a single-family property is $625,000. In Riverside County and San Bernadino County, it is $355, 350.
These property values are decided by the price of the pre-rehabbed property combined with the rehabilitation cost, or (if less) 110% of the appraised value of the property after the completion of rehabilitation.
Golden Empire Mortgage can easily help those interested in the 203(k) loan program. Call today at (909) 457-0257.
