| Almost everyone knows about FHA mortgages. | | | | and the inspector's report, your loan file will be |
| They are tailor-made for first time homebuyers | | | | reviewed by an underwriter specially trained and |
| and others with less than perfect credit or other | | | | certified in rehab loans. Your credit and finances |
| financial issues. You don't have to be low income | | | | do not have to be perfect to be approved, but |
| or have bad credit to use FHA, but generally the | | | | the creditworthiness and qualifications are similar |
| loan limits prohibit high priced homes.What you | | | | to a regular FHA loan.One of the benefits of a |
| may not know about FHA is that there is a | | | | 203K is that all costs can be added into the |
| special loan program designed to provide the | | | | project. The fees, permits, closing costs, etc. are |
| funds to buy or refinance your home PLUS | | | | all added up and your downpayment on the |
| additional funds to make repairs or | | | | purchase is calculated on the total. If you are |
| improvements.This FHA mortgage is called the | | | | refinancing instead of purchasing, the amounts are |
| 203K and the K is the operative part of the | | | | totaled the same way, but you might already |
| name. Not every lender participates in the rehab | | | | have enough equity in the home to avoid coming |
| loan program, but the major national lenders do. If | | | | up with any cash.What's next? Once approved, |
| the loan officer you contact is unaware, then call | | | | the loan closes and the rehab portion of the |
| the corporate office and ask them to direct | | | | money is escrowed by the lender. The contractor |
| you.The FHA 203K loan program calls for an FHA | | | | submits requests for payment and each phase is |
| inspector to go over the house, using the plans | | | | inspected. As soon as the work passes the |
| you gave him. Before you get to this inspection | | | | inspection for completion, the contractor is paid. |
| phase, you should be working with a general | | | | You can not go back to the well for more |
| contractor who understands how to provide plans | | | | money, so your initial plan must be a good one. A |
| and specs for a project. Plans and specifications | | | | contingency fund is usually added in during the |
| are standard in the contracting industry for | | | | total project calculation.This contingency fund can |
| anyone managing a project >$5000, which is the | | | | only be used to fund hidden repairs that were not |
| minimum rehab amount for this loan program.The | | | | evident during the initial workup. Any remaining |
| FHA inspector will decide if the project is feasible, | | | | funds in the contingency are used to pay down |
| depending on whether there is additional work | | | | the mortgage at the end of the project.The FHA |
| required to bring the property up to code, and | | | | 203K mortgage is not a "piece of cake", but if |
| whether or not the property will appraise for | | | | you do not qualify for low cost money at the |
| enough to make the project "worth it". FHA is | | | | local home improvement equity loan bank, then it |
| willing to lend based on the after-rehab value and | | | | is very definately worth looking into.Judi Moore |
| will even stretch that value a little in order to get | | | | authors Ask The Underwriter at 2rHouse.org and |
| houses brought up to code.Once the lender is | | | | personally answers questions from readers about |
| happy with the valuations, the plans and specs, | | | | FHA mortgages and mortgage advice in general. |