The FHA 203K rehab loan program has been a lending staple of the government for years. Basically, it’s a lender-friendly program- sort of a partnership with state and local housing agencies and non-profit organizations – to rehabilitate single family properties. However, let’s call it what it is: a home inprovement loan. You go to an FHA lender for the money. Why” Because HUD (Housing and Urban Development) does not make direct loans to help people buy homes. These approved lenders love this type loan program because the risk is zip, nada, nothing – since it’s guaranteed by you know who.
There’s an old saying: “You won’t get it if you don’t ask.” So start thinking about sprucing up that home that has served you and your family well all these years by using this wonderful loan program. But before you start your car and head to the nearest lender/bank to get started, best you follow these simple guidelines:
1. Have a credit report run on yourself. There may be a local credit company in your town. If so, have them do it. Probably only cost you $15 bucks, but it will save you the embarrassement of having the lender do it and give you “thumbs-down.” Oh, one more thing. Forget about that TV Ad that offers: ‘free credit report.” It’s not free.
2. Make a list of all the improvements you want to make to your home for the lender.
3. This FHA 203K program can be used to rehab a single family dwelling or a one-to-four unit property. (4-plex) It can also be used with a condo or townhouse unit.
4. The program is also good for purchasing a dwelling and the land it’s located on to rehabilitate it. This is good news. Start looking around for a house on land that needs a loving touch, and proceed forward. Heavens knows in these tough economic times you should be able to find a bunch just driving up and down a couple streets in your town.
5. Another use of the FHA 203K program is to buy a home that is sitting on another site, and move it to another vacant piece of property. Just make sure you do your homework on this. The new site must conform to city requirements (zoning) and be placed on a permanent foundation. Actually, this might turn out to be a bit more challenging. Try #4 (above) first.
6. You can use this program to refinance the existing debt and rehabilitate the home. In other words, if the property you select already has a mortgage on it, don’t worry about it.
7. FHA 203K loan programs are for owner-occupied only. NO investors need apply
8. You have a choice of a 15 or 30 year mortgage: fixed or ARM.
9. These type loans are assumable to any qualified buyer with no money down. The operative word here is “qualifed.”
Finally, here are some costs that you may be allowed to insert in your new loan: permit fees, title/escrow fees, inspections, appraisal, engineering and architect fees, and best of all: up to six months of PITI mortgage payments. Yikes!