Michigan’s FHA 203K loan program is gaining popularity among homebuyers. Also known as the “FHA rehab loan”, this mortgage program allows for a minimal out-of-pocket investment into a property. It allows the homebuyer to finance repair costs, appliances and other home improvements into their mortgage with one monthly payment.
Logistically speaking, a homebuyer, after agreeing to purchase a home for a set price, attains quotes from contractors to have renovations done. An appraisal of the home is then done, taking into account the home’s value once renovations have been completed. You can then borrow up to 96.5% of that appraised value. As soon as closing takes place, funds for renovations are placed in an interest-bearing escrow account and construction begins. Once renovations are complete, a final inspection takes place, the contractors are paid out of the escrow, and you move in to your beautifully renovated new home!
For more information on FHA 203k Mortgage Loan programs from Riverbank, call us at 800-555-2098 or apply online today!
Many banks will simply deny a loan if the subject property is not in perfect condition, but that is not the case with the FHA 203K loan program. Do not walk away from your potential dream home over fear of renovations and a little extra paperwork. The FHA 203K mortgage loan program allows you to finance up to $35,000 in repairs under the Streamline program, and more under the standard program. The standard program allows for a renovation budget of up to 50% of the completed value of the home.
The two most well-known renovation loan programs are the FHA 203(k) and Homestyle Renovation programs. 203(k) is an FHA program, while Homestyle Renovation is a Conventional program. Each renovation loan, therefore, must follow the requirements and guidelines of its parent program.
Some of the standout benefits of the FHA 203(k) program include a low 3.5% down payment, a shorter wait time after bankruptcy or foreclosure, acceptance of lower credit scores, lower interest rates, higher allowable debt-to-income ratio (DTI), and ability to replace freestanding appliances.
The homebuyer can use the FHA 203(k) program to finance repairs of anything from painting, to deck replacement, to room additions. Improvements and upgrades can be made, even if the home does not necessarily need them to be livable. All health, safety and energy conservation items must be addressed first, prior to completing general home improvements and upgrades. See below for an example list of upgrades homebuyers have made using the FHA 203(k) mortgage loan program:
For more information please view the FHA 203k Mortgage Worksheet.
To be eligible, the subject property must be a 1-2 family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.
In addition to typical home rehabilitation projects, this program can be used to convert a single family dwelling to a multi-unit dwelling. Alternatively, an existing multi-unit dwelling could be converted to a single family home. See below for a full list of eligible property types:
Mortgage rates are very competitive for this loan program. To get an exact rate quote for your situation, speak with a Riverbank Finance loan officer. FHA loans, in general, are less credit driven than Conventional loans, therefore, if you have a lower credit score, the FHA 203(k) mortgage loan program would be a great solution for you and your mortgage needs.
To apply for a FHA 203K renovation mortgage the first step is to request information below or speak with a Mortgage Loan officer at 800-555-2098.