Every day homeowners save up money for their down payment as well as their closing costs so they can buy a new home. But what happens if they fall in love with a home that needs repairs that will require more cash? Some buyers are not able to come up with more cash to spend on these repairs. To help solve this problem, the Federal Housing Administration (FHA) offers a unique program that allows you to finance these additional expenses when you purchase the house, called Section 203 (k) Rehab Mortgage Insurance.
Traditionally, buyers have needed to fund these repairs themselves after closing, either by using cash, or secure a home improvement loan (usually at a higher borrowing rate) in addition to a mortgage for the house purchase. This limited the amount of people that could purchase a home and then complete repairs and upgrades.
With the 203(k) program, however, borrowers can wrap the purchase and rehabilitation costs into a single mortgage offered at a competitive rate. Borrowers can select between a fixed- or variable-rate loan, up to 30 years. Like other FHA loans, the down payment can be as low as 3.5 percent.
STREAMLINED PROGRAM: The FHA also offers a streamlined program that provides financing up to $35,000 in rehabilitation costs on top of an existing mortgage. It’s a simpler process that helps buyers make their home move-in ready.
Or, current homeowners can use the funds to make repairs or improvements to prepare their home for sale. What a great way to make a property shine above the other properties on the market and to get a property ready for a new homeowner to move in.
There are of course limitations and restrictions and you do have to qualify for the programs. To learn more about either 203(k) program, visit hud.gov/program_offices/housing/sfh/203k. Or you can contact me and I will put you in touch with a local lender familiar with the FHA 203 (K) program as well as other loan programs.
Do you have questions about buying a home? Schedule a free phone consultation today! I look forward to connecting!