Closing More Loans Using the FHA 203(k)

Real estate agents and home buyers are scrambling to adjust to today's real estate market which is filled with foreclosed homes that have suffered from disrepair and neglect. Most banks that own these foreclosed properties do not repair them. This means that many of these houses do not meet the minimum standards in order to qualify as acceptable collateral for most conventional loan programs, thus making it difficult for borrowers to qualify for a mortgage.

This potentially negative situation is a real opportunity to savvy mortgage professionals who use the Federal Housing Agency's (FHA) 203(k) rehabilitation loan program.

This FHA-insured program prevents the need to find separate interim financing for the property's purchase and rehabilitation and allows one mortgage to cover both aspects. Maximum loan amount are determined by the Department of Housing and Urban Development (HUD) on a county by county basis. An example of a lower limit would be a single family home in New Mexico where the maximum in most counties is $271,050. Higher maximums of $729,750 are found in California. You can look up the HUD county limits by going to https://entp.hud.gov/idapp/html/hicostlook.cfm.

Two reasons that someone might not suggest a 203(k) loan to a borrower is the belief that obtaining it is a hard and time consuming process. Although there is more involved in completing a 203(k) purchase than a normal loan, most 203(k) loans can still be closed within 30-60 days from start to finish. Additionally, though there is more work involved than on regular purchase loans, that extra work can translate into a sale that you wouldn't have otherwise had. In this case, more work equals more money.

Some of the benefits of a 203(k) loan may include:

* Low Down Payment.

* Increase maximum mortgage by up to 20% with the installation of qualified solar energy equipment.

* Up to 6 Months with NO PAYMENTS -- Not to exceed time it takes to complete the construction.

If you are a real estate professional wanting to help more borrowers get into a home, the FHA 203(k) could be a key ingredient to your success.

If you are buying a home, learn more about home loans at our Mortgage Help center.

Other articles by Steven L. Jackson

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