Follow Neal Twitter Facebook
Email Neal Email
Residential Real Estate
May 1, 2017

What Is An FHA 203k Loan?

Sponsored Content provided by Neal Johnson - Licensed Real Estate Broker , Network Real Estate

Buying a property in need of renovation can be a great way to build equity and get a fantastic deal in real estate. If you don't have the funds to renovate the property, coming up with them on the fly can be a challenge. In this situation, the FHA 203k loan might be the tool you've been searching for

The FHA 203k Loan

The basic idea behind an FHA 203k loan is that it makes it possible to borrow the money that you need to buy a property and rehab it with a single loan. You've got one closing for the project and everything is lumped together. This is often the ideal solution for entrepreneurs looking for a way to get the money they need to remodel a house and acquire it at the same time.

Qualifying For The FHA 203k Loan

While the FHA 203k loan can be a powerful tool for the right person, not everyone will qualify. Basic credit and income requirements will apply for this type of loan. Most banks will require that you have at least a 640 FICO score. Since the loan is backed by the FHA, banks can be a little more lenient with their underwriting standards, but they are still on the hook for the majority of the funds.

In addition to meeting underwriting requirements, you'll also have to put up some cash for a down payment. You'll need at least 3.5 percent of the purchase price of the property to get an FHA 203k loan. The value of the home also cannot exceed the maximum FHA lending limit in your area.

Types Of 203k Loans

The FHA 203k program presents you with two different options to pick from, depending on the type of house you hope to buy and rehab. The streamlined version of the program is perfect for homes that don't need any structural repairs. The maximum amount for repairs on this type of home is $35,000. This is a perfect option if you just need to do cosmetic repairs to the property.

The standard 203k loan is for more intensive repairs. They require you to make at least $5000 of repairs and they allow you to borrow more money for repairs overall.

Considerations

While the FHA 203k loan can be a powerful tool in the right situation, it's not for everyone. One of the downsides of this type of loan is it takes longer to close. When using an FHA loan, there are more requirements and hoops to jump through. You'll have more paperwork to complete and it takes the bank longer to process. If you're involved in a deal that needs to be closed quickly, the FHA 203k loan may not be ideal.

In addition to the extra time it takes to complete, you'll also have to pay a 1.5 percent fee for using this loan. Despite the extra time and fees, it is often the only option that makes sense for those hoping to buy a property that needs some work.

Neal Johnson is a CMCA, CRB, CNE and GRI-certified, licensed real estate broker at Network Real Estate, which has exclusively served a high volume of property sales and purchases in the greater Wilmington area for more than 30 years. With three offices at College Road, historic downtown Wilmington and Pleasure Island, Network’s brokers are widespread and well-versed in this marketplace, making Network a preferred real estate company for first-time homebuyers and beyond.

 

Other Posts from Neal Johnson

20489 networkrealestate insightsad final 121814105759
Ico insights

INSIGHTS

SPONSORS' CONTENT
Mc2 56882

Innovation & Housing Panel Discussion

Scott Byers - Majestic Kitchen & Bath Creations
Robindavisccu1 1011944433

CCU’s Approach To Data Security: Everyone Plays A Role

Robin Davis - Corning Credit Union (CCU)
Dave sweyer 300 x 300

Your Guide To Hiring The Right Professional Property Management Company

Dave Sweyer - Sweyer Property Management

Trending News

Businesses File To Be Essential Amid State Stay-at-home Order

Christina Haley O'Neal - Apr 6, 2020

Grant Program Launched To Help Downtown Wilmington Businesses

Cece Nunn - Apr 6, 2020

BIZTALK: Banking On Crisis Loan Programs

Staff Reports - Apr 6, 2020

In The Current Issue

Apiture Partners With Texas-based Firm

Wilmington-based financial technology firm Apiture’s choice of a tech partner enabled it to move its clients from a legacy data system to th...


Flurry In The Wake Of Fed Moves

As the Federal Reserve took action in mid-March to re­store public confidence in the U.S. economic system, two local financial advisers prov...


Survey Seeks Workforce Info

Businesses around a six-county region are being encouraged to participate in an analysis of the workforce and employment challenges in South...

Book On Business

The 2020 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2019 Health Care Heroes
August 26, 2019 Power Breakfast: A Healthy Sale?
2019 WILMA Leadership Accelerator
2019 WilmingtonBiz Expo Keynote Lunch - CEO, nCino, Pierre Naude`