What is a 203k Loan?
The Federal Housing Administration’s 203k loan is part of the Department of Housing and Urban Development’s program to repair and rehabilitate properties of single families. In other words, it’s a home improvement loan which helps revitalize communities and neighborhoods and expands the opportunities to own a home.
Is there an agency to help fund repairs to a home built in 1941?
You could apply for an FHA 203k rehab loan for this purpose. This is a mortgage insurance program which has been developed to assist people in undertaking repairs and rehabilitation of certain properties like foreclosures, distressed property, and houses in need of upgrades and improvements.
The Federal Housing Authority, a department within the U.S. Department of Housing and Urban Development (HUD), offers this loan to help lenders, home buyers and lower income neighborhoods to rehabilitate foreclosure properties and houses that need a lot of restoration work. You could visit their website and apply for the loan.
Can excess FHA loan money be used for home improvements?
The loan amount sanctioned would be specifically based on the purchase and sales agreement. Instead, you could apply for a 203k loan that would help buy the home and also allow a certain amount for improvements and repairs. The HUD website will offer more details.
What would closing costs be on a 203k loan in the amount of $325,000 with 10% down and an additional $82,000 for rehabilitation?
As a HUD-backed loan, the caps that can be charged in closing costs and fees are:
- Appraisal Costs (Actual Cost): $300 -$350 generally
- Credit Report Costs (Actual Cost): Customary and reasonable costs necessary to close the mortgage.
- Origination Fee: Max 1% of loan if under $417,000
Therefore, in a typical HUD closing, closing costs would be 2-3% of the total loan value, or around 8-12K. This amount can differ depending on other factors like processing, underwriting, prepaids for taxes and insurance, legal fees, document preparation, and so on.
How to cancel an FHA 203k loan if the realtor is not doing their part so it can be closed
Case Details: The realtor has the deposit on the down payment and all required documents, but is still asking for the same papers to be signed and will not release the down payment.
If you would like to cancel your loan, there are two things that you could do. One, you could review the agreement you have signed and check if the sellers have violated any of the clauses. If the property is within an association, you could try "denying" the HOA docs required and get out of the agreement. Second, if this doesn’t work you could try hiring an attorney to help get your money back.
Many homebuyers find that most of the short sale listings and foreclosures they would like to buy need a certain amount of repair and improvement to match personal and bank standards. This is where a 203k loan may provide an ideal financing option with a limited amount of down payment.