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Amazing rehab/home improvement loan

If you are thinking about buying a house, remodeling or repairing the house you have, then it's definitely in your best interest to know about the FHA 203k loan. This is truly and an excellent loan program in today’s market but not many people even know it’s out there to take advantage of.

So.....what the heck is it?? Basically, a 203k loan allows you to buy a house and fix it up without using money out of your own pocket and basing the loan amount on "future value" after the improvements have taken place. There are two flavors of 203k: Streamline & a fully funded. Here is what you need to know.

Streamline:
This is a less complicated 203k loan that should be used for improvements and repairs up to $35,000.
Types of work that can be done include:

• Finish basement
• Remodel Kitchen & baths
• New furnace and air conditioning
• Minor electrical and plumbing
• Connecting to public water & sewer
• Decks
• New flooring
• New paint
• New cabinets or countertops
• Siding
• New roof
• Buy Appliances: stove, refrigerator, microwave, dishwasher, hood vent, & washer & dryer

As an example: Jon and Jane want to buy a house for 200,000. The house needs a new furnace, roof & they would like to put on a deck which altogether costs $23,000. With their streamline FHA 203k loan, they will need a down payment of 3.5% of $223,000 (the purchase price plus the cost of repairs). The loan amount will be $215,195 and the down payment amount is $7805. Fifty percent of the funds that are needed to complete the project are released at the time the loan closes and the other 50% are held in escrow and disbursed upon completion.

A refinance would work in a similar fashion. Let's say Jim owns a home that today is valued at 300k. Jim owes 275k and he wants to finish the basement which will cost 35k. Jim can get a loan for up 96.5% of $335k to complete his project but since the project is using the maximum amount of 35k, Jim's loan amount will be $310,00. This would allow him to complete the lower level with no out of pocket expense.

Fully funded 203k loan:

This is the 'real McCoy' version utilizing the full potential of the funds for a complete rehab project. As an example, if Jon & Jane decided to buy a 300k home that needed to be completely rehabbed & planned on putting an addition, they would opt for a full 203k. Let's say the project will cost 160k. Provided the future value could be supported, Jon & Jane could have a loan amount for 96.5% of $460k, allowing them to cover nearly the full cost of the remodel.

In today's real estate market, the FHA 203k loan is a tremendous option. The government wants the housing market to recover and neighborhoods to flourish. While the tidal wave of foreclosures is not predicted to subside for some time, this provides unprecedented opportunity for a buyer with vision. Some of these places need some work, and the FHA 203k loan is ideal for those that have ability to buy but are not cash rich. Coupled with the extension of the tax credit (which is no longer just for first time home buyers), there is major incentive to get off the bench.