A Guide to the FHA 203(k) Renovation Loan For Purchases and Refinances.

An important tool for community and neighborhood revitalization, the FHA 203 (k) loan offers flexible qualifying and low down payments:

• FHA minimal down payment
• Flexible credit qualifying
• Assumable loans
• Finance up to 6 months of mortgage payments
• Purchase or Refinance and Improve all in one loan

The 203(k) loan program offers borrowers the resources to rehabilitate a home that may be in need of repair, either the home that they currently live in, or that special fixer-upper opportunity. One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home. Made available to certain lenders by the U.S. Department of Housing and Urban Development (HUD), the FHA 203(k) program has already provided many buyers with the funds necessary to buy their first home, or greatly improve a move-up home. The FHA 203(k) loan is available to borrowers of all income levels, to homeowners who plan to occupy the house, and for homes with one to four units.

• 203K Eligible Borrowers
• Owner Occupants – Purchase – Refinance
  Investors NOT allowed
• Types of 203K Loans
  • 30 or 15 year fixed rates
  • One year ARMS
  • Assumable to a qualified buyer, with no money down
• Eligible Properties
  • Single Family Dwellings
  • Condominium
  • Townhouse
  • Mixed Use (Storefront)
  • 1-4 Unit Buildings- you can increase or decrease the number of units with this loan.
• Structural Alteration and Reconstruction:
  • Changes for improved functions and modernization
  • Elimination of health/safety hazards
  • Changes for aesthetic appeal
  • Plumbing, heating, air conditioning, and electrical upgrades
  • Well and/or septic repairs
  • Roofing, gutters and downspouts
  • Flooring, tiling and carpeting
  • Energy conservation improvements
  • Major landscape work and site improvement
  • Access for the disabled
• Home Inspection
  If structural modifications are being made, and FHA Approved 203(k)
  consultant (estimator) estimates the cost of your construction. The cost
  consultant assists you in determining the scope of repairs and the costs
  budgeted for the renovation job.
  • Perform a home inspection to create preliminary costs estimates based
    upon FHA minimum property standards plus the scope of work as
    defined by the home owner/buyer.
  • Once project has been determined, the cost consultant prepares a “work
    write-up” and 3 contractor bid packages are issued to the home owner/buyer.
• Appraisal:

The appraiser will be given a copy of your “work write-up” to estimate an
after improved value for your new home or current home. We loan against that
value thus giving you credit for the work to be performed.

• Other Eligible Costs: (These costs may be financed into the mortgage loan)
  •   Contingency reserve (10%-20%)
  • Up to 6 months PITI mortgage payments
  • Permit costs
  • Consultant fees
  • Inspection and title update fees
  • Architectural & Engineering fees (if needed)

7 Simple Steps to Buying a House Using FHA 203(k) Renovation Loan>

1. Locate the home you want and submit a contract for purchase- contingent
   on a home inspection.
2. After your contract is signed, schedule a home inspection with a 203(k) cost
   consultant to budget your renovation. If no structural work is required you
   can skip the consultation and move to step 4.
3. If you approve the budget, the 203(k) cost consultant will prepare the work
   write-up for the appraiser and lender, and will prepare three contactor bid
   packages for you.
4. You can now bid your job to general contractors, or multiple sub-contactors
5. Appraiser uses work write-up to value home as if all work is completed.
6. Loan closing (30 to 45 days average).
7. Within 30 days of closing, start project with general contractor, or multiple
   sub-contactors.