Lots of information has been published on the internet and typical news outlets about the advantages of the FHA 203k loan. Without a doubt this is an excellent vehicle for buying an existing home and financing any needed repairs or improvements with one simple loan. However, the same type of loan can be used by people looking to refinance an existing mortgage to an excellent rate.
Here are some of the top reasons why an FHA 203k loan could benefit homeowners in the current economy.
- Allows the use of 110% of value AFTER REPAIRS – Rather than using 90% of the current appraised value.
- Combine repairs to existing mortgage – Instead of getting a second mortgage or a home equity line of credit, borrowers can combine any improvements or repair costs to the existing mortgage.
- One low rate for entire amount – Borrowers can take advantage of the historically low mortgage rates and repay the loan with extremely low payments.
- Protected by escrow – Homeowners are protected by an escrow for repairs. The money is held in an account until the work is completed, ensuring the work is actually done before payment is made.
The FHA 203k loan comes in two varieties; the streamline and the conventional. The streamline version has a cap of $35,000 for repairs (the convention has not such cap). It also does not require inspections or reserves and has smaller fees charged to do the loan.
Detailed program information can be found on our FHA 203k page of our website.