Use of a FHA 203k Rehab loan?
I am a first time home buyer in the Seattle area. I have been looking at older homes within the city but the ones that are in my price range are "Fixer-Uppers". I have been reading about the 203k rehab loan and have some questions. For these questions I have been using the following criteria: House – asking 0k, 4bd, 1 bth,1500sqft, 1200sqft unfinished basement. Will need kitchen update, flooring update, addition of another bathroom, paint in & out and basement finished. Other houses in the area (within 2 miles) that are similar in sqftage and improvements have been assessed for 0K+
Will a 203k cover these improvements?
If approved for 0K and buy at 0k; How much more can be borrowed for the rehab? What is the basis for the dollar amount for the rehab part of the loan?
What does this increased amount of $$$ do for the monthly payment, Percentage rate, closing costs/fees?
I know that I am considered a "First Time Buyer" and maybe not that well educated on this type of loan. From what I have read I am under the impression that (if approved): You buy the home with the 203k rehab, Hire a contractor to make the improvements, then go in to a livable,newly updated home. Is my head in the clouds??
Thank you for any and all input!
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Tags:
203k rehab loan,
bth,
closing costs,
FHA 203k,
first time buyer,
first time home,
first time home buyer,
flooring,
head in the clouds,
improvements,
paint,
percentage rate,
seattle area,
time home buyer,
unfinished basement
Tags:
203k rehab loan,
bth,
closing costs,
first time buyer,
first time home,
first time home buyer,
flooring,
head in the clouds,
improvements,
paint,
percentage rate,
seattle area,
time home buyer,
unfinished basement
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No, your head is not in the clouds…203(k) loans are fantastic!
To answer your questions…
1) Yes,a 203(k) loan will cover the improvements mentioned
2) The amount that can be borrowed on these loans is the lesser of three things.. a) the cost of the improvements b) 110% of the value of the house after the improvements are made; and c) the amount of a mortgage that you qualify for. So in your example, I am going to assume that it will cost $50,000 to make these improvements and that your home will then be worth $400,000. Using a) you could borrow 280,000 (minus your 3.5% down payment investment, you still have to place that money down on all these examples). Using b) you could borrow 440,000 and using c) you could borrow 250,000. The lower of these 3 is $250,000 so you could do a 203(k) loan and get about $20,000 for repairs. You can never receive more than you are qualified for. In this example, you may have to do less work than you initially wanted to.
3) Your monthly payment only increases by the additional amount that you are borrowing. Generally the rate is a small higher – .5% to 1%. Sometimes I find that they are priced the same. Usually not though. We generally charge a small extra on these loans since there is a lot more work for the lender to do on them. Nothing extraorbitant though.
4) You've got it right for the most part. You place an offer in, it's accepted, your lender hires a 203(k) cost consultant to look at the house, go over your plans with you, and write up the cost to make your repairs. The loan closes and your contractors make the changes and you go in.
Excellent luck! Let me know if you have any other questions.