| Almost everyone knows about FHA mortgages. They | | | | underwriter specially trained and certified in rehab |
| are tailor-made for first time homebuyers and others | | | | loans. Your credit and finances do not have to be |
| with less than perfect credit or other financial issues. | | | | perfect to be approved, but the creditworthiness and |
| You don't have to be low income or have bad credit | | | | qualifications are similar to a regular FHA loan.One of |
| to use FHA, but generally the loan limits prohibit high | | | | the benefits of a 203K is that all costs can be added |
| priced homes.What you may not know about FHA is | | | | into the project. The fees, permits, closing costs, etc. |
| that there is a special loan program designed to | | | | are all added up and your downpayment on the |
| provide the funds to buy or refinance your home | | | | purchase is calculated on the total. If you are |
| PLUS additional funds to make repairs or | | | | refinancing instead of purchasing, the amounts are |
| improvements.This FHA mortgage is called the 203K | | | | totaled the same way, but you might already have |
| and the K is the operative part of the name. Not every | | | | enough equity in the home to avoid coming up with |
| lender participates in the rehab loan program, but the | | | | any cash.What's next? Once approved, the loan |
| major national lenders do. If the loan officer you | | | | closes and the rehab portion of the money is |
| contact is unaware, then call the corporate office and | | | | escrowed by the lender. The contractor submits |
| ask them to direct you.The FHA 203K loan program | | | | requests for payment and each phase is inspected. |
| calls for an FHA inspector to go over the house, using | | | | As soon as the work passes the inspection for |
| the plans you gave him. Before you get to this | | | | completion, the contractor is paid. You can not go back |
| inspection phase, you should be working with a general | | | | to the well for more money, so your initial plan must be |
| contractor who understands how to provide plans and | | | | a good one. A contingency fund is usually added in |
| specs for a project. Plans and specifications are | | | | during the total project calculation.This contingency fund |
| standard in the contracting industry for anyone | | | | can only be used to fund hidden repairs that were not |
| managing a project >$5000, which is the minimum | | | | evident during the initial workup. Any remaining funds in |
| rehab amount for this loan program.The FHA inspector | | | | the contingency are used to pay down the mortgage |
| will decide if the project is feasible, depending on | | | | at the end of the project.The FHA 203K mortgage is |
| whether there is additional work required to bring the | | | | not a "piece of cake", but if you do not qualify for low |
| property up to code, and whether or not the property | | | | cost money at the local home improvement equity |
| will appraise for enough to make the project "worth it". | | | | loan bank, then it is very definately worth looking |
| FHA is willing to lend based on the after-rehab value | | | | into.Judi Moore authors Ask The Underwriter at |
| and will even stretch that value a little in order to get | | | | 2rHouse.org and personally answers questions from |
| houses brought up to code.Once the lender is happy | | | | readers about FHA mortgages and mortgage advice |
| with the valuations, the plans and specs, and the | | | | in general. |
| inspector's report, your loan file will be reviewed by an | | | | |