Are Renovation Expenses Out of Reach?

Buyers who wish to purchase a home in need of renovation or repairs may not know the cost associated with completing those repairs and will likely need assistance. Being pre-qualified for a home loan is favorable and a mortgage broker can assist borrowers with this process. Making the choice to secure a home loan is a big step in a home buyer’s life and making sure that a buyer has secured the proper type of loan is crucial.

Buyers who intend to purchase a home requiring repair or renovation should consider a 203k loan. “What is a 203k loan?” is a question that many mortgage brokers hear.
The costs of repairs can be merged with the cost of purchasing the home into one loan with a 203k FHA loan. 203k loans appeal to many because of the extensive list of repairs that can be done and will qualify. Borrowers can use the money to renovate an old home, repair flooring or replace a chimney.

The costs associated with the repair or upgrade cannot exceed a certain percentage of the base value of the home based on an appraisal. Borrowers must also obtain repair estimates from contractors and provide those to the lending institution to estimate the after renovation value. Not only are there a few extra steps involved with obtaining a 203k loan, the work must begin within thirty days of closing and be completed within six months of the closing date. Homes can receive a new life with a 203k loan and home buyers and home owners alike should consider this as a financing option.

If you are working with a mortgage broker they will also likely explain another type of loan known as a homepath loan to you. Because the cost of repairs can be wrapped into a homepath loan as well, the two types of loans are often compared directly.Homepath loans are available on homes which have been foreclosed or repossessed. Houses which qualify for homepath loans are all sold in as-is condition and should receive a thorough inspection from a potential buyer. Mortgage loans are set up to cover the costs of renovation and will be higher than the value of the home in its present condition. The details of each loan type can be confusing to many which is why it is important to consult with an educated mortgage broker.

Mortgage brokers will also assist customers with the extensive paperwork required to obtain home loans and make sure that the documents are received on time. Along with paperwork there is a cost associated with obtaining appraisals and also a down payment which a borrower needs to be aware of.
Buyers are able to transform homes by utilizing 203k and hompath financing options and the possibilities are endless.

Are You Dreaming of Owning a Fixer-Upper?

Many first time home buyers will not be able to find homes that are within their budgets that do not need some type of repair or improvement. Homes that need some TLC can be transformed into dream homes and the cost associated with doing those renovations can be wrapped into a home loan.

What Exactly is a 203k Loan?

A 203k loan allows for buyers to combine renovations costs with the amount of typical mortgage loan that they qualify for. Borrower’s can keep interest rates low with this type of financing option also because it is insured by the Federal Housing Association. Not only can 203k loans benefit home buyers, this loan can also be used for home improvement projects that existing home owners wish to accomplish. Borrowers who qualify for a 203k loan will have one loan payment instead of two because one loan will accomplish two tasks. When applying for any time of loan, paperwork and time is involved, but applying for a 203k loan is no more labor intensive than a traditional loan.

The Documents Necessary to Apply for a 203k Loan

The first step is to choose a lending institution and a mortgage broker who is experienced in dealing with FHA loans. Paperwork is involved in securing an FHA loan and your mortgage broker will help you to assemble and gather the necessary paperwork.

Additional paperwork involved with a 203k loan that is typically not a part of the typical loan process is contractor bids. If a contractor’s bid is not high enough that results in the borrower not having securing a high enough loan amount and being responsible for the difference. 203k loans require that renovation and repair work begin within a certain time after the date of closing. Mortgage brokers are able to help applicants of the 203k loan process before and after closing with any questions or concerns that may arise. Multiple types of home loans exist and your mortgage broker can explain the benefits of each one.

Another type of loan which will benefit buyers who may not be able to obtain a home within their budget is a homepath loan. Repossessed homes are the only types of homes which qualify for homepath loans. Like a 203k loan, homepath loans allow the costs of repairs to be combined into the loan. The property which a borrower wants to purchase will dictate which loan option is best. Down payment amounts are another factor which deters many buyers away and with either loan option, the down payment amount is less than that of a regular home loan.

The home buying process is often an exciting and stressful time and knowing about different types of loan options will help ease the stress.

In Brief: The 203k Home Loan

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.

A Quick Guide to 203K Loans

The “Federal Housing Administration” (FHA) was created in 1934 by the United States government. The agency was created in mind for the tasks of: establishing a method for home financing through mortgage loans, improving the housing conditions of the country, and controlling and stabilizing the mortgage market. “Fixed” or “rehab” loans can also be another way to refer to a 203K loan, a 203K loan is provided by the FHA. There are two parts of a 203K loan, one part for making home improvements, while another is for buying a new project.

A big benefit to the 203K loan is that you only have to deal with one agreement for home improvement and the purchase of a property. Since the 203K loan is a “two in one” as stated above, the amount of paperwork and costs that are brought upon in the entire process are quite low. Due in part mostly to the fact that the FHA is a government agency, 203K loans are quite competitive when compared to those provided by private banks.

There are not many disadvantages when it comes to a FHA 203K loan. The only complaint normally ever reported about a 203K loan is that it can take a little bit longer to close on the loan then you would normally expect from someone else like a private lender. While attempting to minimize the disadvantages to a 203K loan, there are several reputable credit broking organizations that can assist you with your money management.

Along with the improvements that will be needed with the house, a 203K loan can help pay for the home itself too. The amount of money that you are entitled to borrow depends on the geographic location of the particular property you’re considering. The amount of capital that is loaned is generally 110% of what a home’s projected value would be after the purchase and improvement to the house is complete. There are smaller loan types offered by the FHA which allow you to take on a somewhat smaller task. Within 6 months of closing, the improvements on the property must be finished on the property purchased with the 203K loan.

It’s important to consult with a reputable broking company that can give you a good and accurate estimation before you apply for a particular amount of money for your 203K loan. If you come across the unfortunate circumstance of running out of capital while doing your renovations, you can not ask the FHA for more, so it’s essential that you get a good estimation for costs. HomePath loans is a spectacular broking company that can help you out tremendously. The amount of services and solutions offered by HomePath loans is very large, the offer things such as debt consolidation, loans, mortgages, and management of finances.

Buying a Foreclosed Home? You Should Consider These Options

If you’re trying to buy one of Fannie Mae’s foreclosed properties, you should look into a HomePath loan. These loans aren’t available to all homebuyers or from all lenders. For foreclosed homes, this type of home loan has clear advantages.

One of the advantages of a HomePath loan is the ability to secure a loan with only a three percent down payment for owner-occupants. Investors can also secure HomePath loans, but with a 10 percent down payment instead. Unlike with a conventional loan, a down payment this small will not require you to get home mortgage insurance. This is true of all HomePath loans, regardless of down payment size.

Many buyers can also benefit from the ability to get a HomePath loan without an appraisal on the property. Even if you’re willing to pay more for a home than it appraises for, your mortgage lender likely won’t be and will deny a loan for more than the property is valued at. This isn’t a concern with a HomePath loan. All HomePath properties are appraised before they go on the market, so additional appraisals are not necessary to determine whether the price asked matches the value of the home. Of course, you should still get any home you’re seriously considering inspected so you know what problems it might have, but this inspection won’t derail your purchase.

If the home you’re looking at is a fixer-upper, you can get a HomePath loan for more than the purchase price. That is, you can secure a HomePath loan for up to 97 percent of the value of the house after the repairs have been made, with the extra money being paid to the contractor you hire to do the repairs for you. This gives you an easier way to purchase a home that may need some work, as many lenders won’t offer loans on properties that are not able to pass a home inspection at purchase time.  These types of loans are also referred to as 203k loans.

There are some things to keep in mind when considering this type of loan. Only borrowers with very good credit scores can quality for these loans, particularly if you don’t intend to put more than three percent down. You’ll also end up paying a higher interest rate for the loan, though the actual rate will vary depending on credit history and other factors. It’s important to remember, though, that without a monthly insurance payment, the higher interest rate may not increase your costs significantly. For many people, the extra cost from the higher interest rate is offset entirely by the lack of an insurance payment. Some even end up paying less each month with a HomePath loan than they would with a conventional or FHA loan, despite the higher interest rate.