This areticle highlights the benefits of an Government Insured Mortgage and what is known as a FHA 203K Mortgage, also referred to as a "Renvovation Mortgage." Many people are not aware of the benefits and lower qualifications of these mortgages.
The Federal Housing Administration (FHA) insures mortgages to not only allow low, but also moderate income borrowers to buy their own residences. With government backing, buyers can purchase a home at a lower initial cost.
Many Individuals today are finding it very difficult to qualify for a conventional bank mortgage. There are many benefits in applying for an government insured Mortgage or a 203K Streamlined as it is referred.
Federal Housing Administration” Mortgage Insurance - Section 203(b)
This mortgage provides insurance, not mortgage loans to families. However, this type of mortgage can reduce the overall cost of a home mortgage by thousands of dollars. This type of mortgage also encourages lenders to finance mortgages for people who might just miss the underwriting requirements. For example, these loans typically require a lower down payment.
With Federal Housing Administration, Section 203(b) program, a mortgage applicant can purchase a new or used one to four family home. One of the requirements is that the buyer has to live in the property.
Federal Housing Administration” Benefits
A “Federal Housing Administration” mortgage allows some mortgage applicants to qualify with lower interest rates as appose to higher rates of a conventional loan. This can save thousands in interest charges.
The down payments are also lower. Instead of an average of 10% down, a mortgage applicant can put down as little as 3%. The closing costs can also be financed with the mortgage, lowering the start up costs of purchasing a home.
The Federal Housing Administration” also limits fees that can be charged to the borrower. For example, the loan origination fee cannot surpass 1% of the mortgage amount.
Understanding the Federal Housing Administration”203K STREAMLINE
Program Highlights
• Federal Housing Administration” Renovation Program
• Simplified process!
• Up to $35,000 in repairs with no minimum!
• No consultant required
• No contingency funds required
• Up to 50% of materials can be disbursed after closing
to each contractor in order to defray cost
• Two draws per contractor
• No 10% hold back
Eligible Properties.
• 1-4 unit properties
• Town houses
• Condos (interior only)
• Row homes
• HUD Repos (single unit only)
• Purchase and Refi Transactions
Eligible Improvements
• Repair/Replacement/upgrade of :
- roofs, gutters and downspouts
- existing HVAC systems
- plumbing and electrical systems
- flooring
• Minor remodeling, such as kitchens, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Septic system and/or well repair or replacement
• Repair/replace/add exterior decks, patios, porches
Other Eligible Improvements
• Purchase and installation of appliances, including freestanding ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of lead based paint hazards
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall residing
Ineligible Improvements
• Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall
• New construction (including room additions)
• Repair of structural damage
• Repairs requiring detailed drawings or architectural exhibits
• Landscaping or similar site amenity improvements
Ineligible Improvements
• Any repair or improvement requiring a work schedule longer than six (6) months
• Rehabilitation activities that require more than two (2) payments per specialized
contractor
Who Can Do the Work?
• Borrower can select their own contractor
– Should be licensed and insured if required by municipality
– Should be able to document qualifications
• Borrower can do their own work only if they can document their qualifications
Getting Closed
• Borrower collects contractor bids
• Bids are used to order appraisal
• Appraiser will do a “subject-to-completion” appraisal
• Borrower and contractor sign contract
What Happens After Closing?
• Work begins
• Up to 50% can be paid to each contractor up front
• Final inspection will be done to ensure workmanlike completion of work
• Title update will be needed before final disbursement
Benefits to the 203(k) Streamline
• Much faster process to get to closing
• Includes appliances and cosmetics
• Less expensive (no contingency funds, no consultant fee, fewer inspections, etc.)
• Up to 110% of after-improved value
• Overcomes borrower concerns about property
For more information please call: 386-868-2801 The Mortgage Man Team specializes in such lending opportunities and will go beyond the call of duty in servicing the needs of it's clients.
