Before you can gain an understanding of what a 203k home loan actually is, you need to be introduced to the FHA home loan first. The Federal Housing Authority (FHA) is an institution that gives out government loans to those looking to purchase a home. When a loan is government-issued, it comes with a guarantee, which alleviates the bank’s hesitation of allowing loans to be signed over to people who do not satisfy the lender’s private criteria.
I am not saying that you will be borrowing money straight from our government, and I’m not trying to say that an automatic approval comes with every FHA home loan that is applied for. However, I will say that your chances for an FHA loan approval is higher than getting a privatized loan approved if your credit is below average. You can get approved even if you are bankrupt. When in a bad financial situation, you can take advantage of an FHA loan’s low down payment, which is at about 3.5%, a quarter of a conventional down payment.
With the basics of an FHA loan covered, we can move on to the sub-categories of this style of loan, such as the several additional FHA loan programs that are available to potential homeowners. These programs can involve a normal fixed-rate mortgage of 30 years, plans of a shorter duration, or other plans with adjustable rates. You can even qualify for refinancing or get a home equity loan also.
Of all programs offered by the FHA, the most popular seems to be the 203k loan. 203k loans include the helpful traits of a conventional FHA loan such as flexible credit and low down payments. But the 203k loan offers something unique, and that is its ability to make rehabilitating a house easy, meaning you can borrow to buy or borrow to renovate. This means, in sum, that a 203k loan will allow an individual to update their home with renovations, or allow an individual to purchase a broken down house and rehabilitate it.
The benefits of a 203k loan can impact an entire community by making their area more beautiful and valuable to all its residents. A 203k loan will also help the new homeowner to find a good house to rehabilitate and make it into the house of his dreams. With all of this included in a single loan package and considering how unstable the housing market is, it’s best to sign up for an FHA program.
Just think about all of those foreclosed homes that are available on the market and only need a bit of rehabilitation. So if you want your potential dream house at a low price, consider getting a 203k loan and purchasing a fixer-upper home.
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