So many Buyers today are eager to purchase homes at below market prices. Often these homes are in need of serious repairs or improvements to update the property. The 203k Program handily meets the needs of Buyers today. I personally have originated and closed dozens of these loans back
in the early 1990’s in Harlem and Bedford-Stuyvesant under President Clinton’s Inner City Rehabilitation Initiative. Often we were financing a complete gut renovation of an abandoned Single Room Occupancy (SRO) residence. The Buyers usually paid a price around $50,000 and I would find FHA 203k Financing in the range of $250,000 to cover the purchase and the renovations. Under the provisions of the rehabilitation, the Buyer of such an SRO would convert the Certificate of Occupancy from rooming house to legal 2, 3 or even 4 Family home. The 203k allowed for just such a change and the costs involved, including Architectural fees, Plans and Permits, not to mention the construction costs.
Toay this miracle program allows a Buyer to purchase a home and obtain the monies for repairs or home improvements all rolled into a single loan with a SINGLE monthly FIXED RATE payment. The repairs can cost as little as $5,000 or can run as high as necessary to gut-rehab a home. The limit on
the repair monies that can be included in the loan is the Loan-To-Value (LTV) Limit based on statutory FHA Loan Limits in your area (see below). And this LTV percentage is calculated based on the value of the house AFTER improvements.
The 203k program even has a provision allowing the Buyer to request that up to 6 months worth of mortgage payments be included in the loan so they don’t have to pay two monthly housing
expenses—rent and mortgage—while the house is under construction.
With more and more bank-owned “REO” properties offered for sale, Buyers will need the 203k
Program more than ever before.
203k Interest rates run higher than market, usually about 1% higher, but this is still an ideal program to help Buyers achieve their goals of homeownership while simultaneously updating or renovating a home for the lowest possible cost.
Highlights of the 203k Program:
>Buyer can obtain the cash needed to conduct improvements on a home
purchase folded into the same mortgage loan needed to purchase the house.
>Borrower must qualify according to regular FHA Underwriting criteria with regards to Income, Assets and Credit.
>The Program is only open to Owner-Occupants; no investors permitted. BUT you do NOT have to be First-Time Homebuyer.
>No Income Limits; no minimum income requirements. No geographic limitations, with the exception that the property is here in the good ol’ USA!
Purchase + Improvements = ONE Mortgage and ONE Monthly Payment
Current FHA LOAN LIMITS under the 2009 Stimulus Bill for the New York Metropolitan Region:
* No Reserves on 1 and 2 Family homes (but it helps!)
* 3 Months Reserves required on 3 and 4 Family homes
* 3.5% Downpayment
* 6% Seller’s Concession
* Credit Scores down to 620 (down to 580 with some Lenders)
There you have a good fundamental look at the miracle program known as FHA 203k.