FHA 203k Loans
An FHA 203k Loan is like a standard FHA loan, but with this home loan program you can finance both the purchase of the home, as well as, the repairs to the home. The FHA 203K loan is great home loan product for first-time home buyers who are buying homes that are fixer uppers such as a foreclosure or other homes that do not meet a lender's standard property conditions.
Benefits of an FHA 203k Loan
An FHA 203k loan helps a first-time homebuyer purchase and repair a home that needs to be fixed up before it can be occupied. Here are just some of the benefits of an FHA 203k loan:
- Finance post closing repairs needed to make a home liveable
- Appraisal is based on the "after improved value" of the home
- No income limits
- Don't need to be a first-time homebuyer
- Seller can pay your closing costs
- Lower minimum credit scores
- Compatible with a gift from a family member or friend
- Available in all 50 states
- Great for fixer uppers
Eligibility for an FHA 203k Loan
Qualifying for an FHA 203k loan is just like getting a standard FHA loan and it is often easier to qualify than qualifying for other types of loans. You may still qualify for an FHA 203k loan with a credit score that is in the mid to low 600's, but you'll pay a bit more for the required mortgage insurance if you have a lower credit score. Just like qualifying for a standard FHA loan, the lender will need to make sure that your monthly payments are affordable. They will want to see that your monthly housing and other debt payments are not more than 41% of your gross monthly income (before taxes).
FHA203k and State Bond
It is uncommon to combine an FHA 203k loan with a Housing Finance Agency's (HFA) lower rate, because most lenders and HFA's do not typically offer this option. It is worth checking with your state's HFA to see if they offer this combination. Most FHA 203k loans are made from lenders who specialize in offering the program. You need to shop around though and compare your FHA 203k loan rates and fees lender rates and fees vary.
FHA 203k Fees
In general, the loan fees on an FHA 203k loan are considerably higher than other types of loan. The reason you should expect to pay a higher loan origination fee on an FHA 203k loan is because it is a lot more work for the lenders who offer the program. This is because they are not only loaning you money to purchase the property, they are also loaning and managing the money you get to fix it up. The extra paperwork, time and construction oversight offered by the lender, make this loan more expensive to administer and to get.