What Is The FHA 203k Loan?When a potential homeowner would like to buy a house but the house is in need of repairs, they would have to get financing to purchase the dwelling and then get financing to rehabilitate the dwelling, and then finally getting a permanent mortgage in order to pay off the previous financing that was attained and have a secure mortgage. This is where the FHA 203k loan becomes a great factor for this potential homeowner. FHA works with HUD which is Housing and Urban Development. These two entities together are working for communities being built up and potential homeowners actually getting their homes. But they understand that most of the homes that these people can afford need some work done to them. They created the FHA 203k loan and have many lenders that have come on board to help their cause. The FHA 203k loan is built for the potential homeowner to acquire one loan from an approved lender who is willing to give an FHA 203k loan. This loan is different from other loans because the FHA 203k loan allows the potential home buyer to have permanent financing before the dwelling improvements have been made where other loans will not give the permanent loan until the dwelling is up to code. The FHA 203k loan allows the home buyer to repair or modernize the dwelling with the same permanent loan that he bought the house with. This saves the home buyer on high interest rates from the other fixer upper loans that he would have gotten. In order for the lender to be protected in giving the FHA 203k loan, the FHA 203k loan is endorsed by HUD as soon as the mortgage proceeds are given and HUD creates a rehabilitation escrow account for the homeowner. This then gives the homeowner a permanent fully insured FHA 203k loan. In order for the dwelling to be eligible for the FHA 203k loan, it must be a one to four family dwelling and the dwelling must have been there for at least one year. The dwelling must be in need of some sort of rehabilitation or modernization for the eligibility requirement for the FHA 203k loan. Modernization means that it must meet up to today's basic approval codes for such items as electric and foundation codes. Luxury items and rehabilitation that does not become a permanent part of the site, are not eligible for the FHA 203k loan. |