203K Basics

May 16th, 2011 | By | Category: The Mortgage Connection

The Mortgage Connection | Mike Morgan | The Sahuarita ConnectionBy Mike Morgan of Peoples Mortgage Company
LO LICENSE # 0912532   LO NMLS# 224433   BKBR# 0115327

You may have heard of an FHA 203K loan but are not quite sure what it’s all about. We would like to shed a little light on that for you as these loans are becoming more popular. The FHA Section 203(k) Mortgage Program enables borrowers to finance the purchase of a home and the cost of its rehabilitation through a single mortgage. Rehabilitation construction must begin within 30 days of closing, and all work must be completed within six months of closing by a contractor licensed with the ROC.

There are two types of FHA 203K loan programs – Streamlined and Standard:

Under the Streamlined FHA 203(k) program there is a minimum $5,000 and a maximum of $35,000. Allowable repairs under this program are as follows:
• Repair/Replacement of roofs, plumbing, electrical systems, heating, air conditioning or flooring.
• Minor remodeling that does not involve structural repairs. No additions are allowed.
• Exterior and interior painting and weatherization.
• Purchase and installation of appliances.
• Improvements for accessibility for persons with disabilities.
• Lead-based paint stabilization or abatement of lead-based paint hazards.
• Repair/Replacement/Addition of exterior, patios and porches

Under the Standard FHA 203(k) program there is a minimum $5,000 requirement for the eligible improvements on the existing structure of the property. Allowable repairs are as follows:
• Structural alterations and reconstruction, such as repair or replacement of structural damage.
• Additions to the structure such as installation of an additional bath.
• Changes for improved functions and modernization.
• Elimination of health and safety hazards.
• Reconditioning or replacement of plumbing, heating, air conditioning and electrical systems.
• Installation of well and/or septic system.
• Repair or replace roofing, flooring, tiling or carpeting.
• Energy conservation improvements.
• Improvements for accessibility to the handicapped such as remodeling for wheelchair access, lowering kitchen cabinets, or installing wider doors and exterior ramps.
• Major landscape work and site improvement, patios, decks and terraces that improve the value of the property equal to the dollar amount spent on the improvements or required to preserve the property from erosion.
• Interior and exterior painting.
• The repair of a swimming pool not to exceed $1,500.

All borrowers must qualify for a 203K loan based on FHA’s income & credit guidelines. If you have any questions or are wondering if this might be the right kind of loan for you please feel free to contact me at 520.954.7686 with your specific questions. Or email me at morgan@peoplesmortgage.com.  We are happy to help.