HUD's 203(k) program:
The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased. Many homes in the metro Atlanta, Georgia area fall in this category.
HUD's 203(k) program can help you with this quagmire and allow you to purchase or refinance a property plus include in the loan the cost of making the repairs and improvements. The FHA insured 203(k) loan is provided through approved mortgage lenders nationwide. It is available to persons wanting to occupy the home.
The down payment requirement for an owner-occupant is 3.5% of the acquisition and repair costs of the property.
The Georgia FHA Home HUD 203K Mortgage Loan includes the following steps:
- Locate a fixer-upper and execute a sales contract after doing a feasibility analysis of the property with your realtor. The contract should state that you are seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the lender.
- The Eva Sleeper is available to work with you as you prepare a detailed proposal showing the scope of work to be done, including a detailed cost estimate on each repair or improvement of the project.
- The appraisal is performed to determine the value of the property after renovation.
- If the borrower is approved by the lender, the loan closes for an amount that will cover the purchase or refinance cost of the property, the remodeling costs and the allowable closing costs. The amount of the loan will also include a contingency reserve of 10% to 20% of the total remodeling costs and is used to cover any extra work not included in the original proposal.
- At closing, the seller of the property is paid off and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.
- The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments (PITI) put into the cost of rehabilitation if the property is not going to be occupied during construction, but it cannot exceed the length of time it is estimated to complete the rehab.
- Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of the job, 10% of each draw is held back; this money is paid after the lender determines their will be no liens on the property.
FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers 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.
If you are considering purchasing a distressed property or bank owned property that needs work, the FHA 203K Loan provides up to $35000 that can be rolled into the mortgage to improve or upgrade a home before move in. The money is placed in an escrow account and is paid out to contractors upon completion of work.
WHAT CAN THE FHA 203K LOAN DO FOR YOU?
FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into the mortgage to improve or upgrade the home before move-in. With this new product, homebuyers 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.
- Loan amount based on Completed Value rather than As-is value!
- Very Low 2.75% minimum down payment!
- Relaxed Credit and Income qualifying guidelines!
- Most types of improvements & repairs permitted!
- Fixed or ARM available!
- Can be combined with FHA’s Officer Next Door & Teacher Next Door home ownership programs!
- Ask about 203k Streamline for refinance transactions!
- Can finance up to six months of mortgage payments for owner-occupied properties to cover non-occupancy costs during construction. For example, if you have to spend six months renting an apartment while your home renovation takes place, you can roll those expenses into your loan amount!
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Conventional Loan