The Federal Housing Administration, or FHA, has been helping Americans become home owners for years. This group was created specifically to back funding for mortgage loans in certain situations to allow borrowers who might otherwise be high risk to get the chance at home ownership that they deserve. Today, even despite the recent market crash, more people are becoming home owners than ever before. This is due, in part, to the FHA 203k loan that is available. All the distressed properties and foreclosed homes that are sitting around in need of work have suddenly become potential options for people who want to own a home.
The FHA 203k is specifically designed to help homeowners buy homes that are priced lower because they are in need of repair and to allocate funds for the repair costs as part of the mortgage. If you buy a home that is selling for $56,000 and it needs $4000 in repairs, your mortgage would be for $60,000. There are limits and requirements as a part of the lending process, including how much you can borrow and what repairs are included. However, it's still a very lenient loan option as it is provided by the government and it's worth checking into.
FHA loans require a decent credit score. The general minimum requirement is 620, although there are a few lenders that are still handing out loans to those with a 580 or higher score. People who have higher credit scores will get lower interest rates or better terms on their loan. The 203k follows most of the basic regulations of the FHA guidelines for lending, but it does have a better interest rate and offers to roll in repair costs for homeowners.
There are a lot of different benefits to using the FHA 203k for your home improvements. This loan offers so many incentives, including:
- A low down payment requirement
- Fixed interest rate for 30-year loan
- Minimal closing costs
- Closing costs and down payment can be paid as a gift by family or governmental assistance
- Low credit score requirement
- A chance to buy a home when it might not otherwise be possible
These are just a few of the perks that come with this unique loan. The availability of this loan is limited because it is such high risk, and often the requirements are taken much more seriously because of the type of risk involved. The lender needs to see proof of the proposed repair costs, financial stability, and make sure that you're not getting in over your head by purchasing something and putting too much money into it or paying more than you can afford. Unlike the pre-mortgage crisis days where lenders were happy to lend to anyone they could, today they are looking out for their customers and themselves, making sure that people really are ready for a mortgage, even if it is just an FHA 203k loan.
It's important that you read up on the regulations and fine print of the FHA loan application process. This will tell you how to do everything that you need to do and it will make sure that you get all of the support and information that you deserve. Only you can decide if this is the right move for your situation, so call a consultant that knows all about these 203k loans and discuss your options with them. Provided that you have a reasonable credit score and debt-to-income ratio, it should be easy for you to get approved for the FHA 203k loan from the lender of your choice.
Home owners and neighborhoods alike will benefit from this lending option and that's precisely why it was created. Although it remains largely a secret of the mortgage industry, more people are discovering and discussing the FHA 203k loan and what it has to offer. This will help more borrowers come to the forefront and get more homes back in shape in the years to come.