Denver FHA 203K Loan Program
The FHA (Federal Housing Administration), part of HUD, provides a 203K loan program is designed to provide loans for the rehabilitation and repair of single family properties. Lenders, along with state and local government agencies, have found ways to combine the FHA 203k loan with other financial resources, such as HUD's HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers.THIS IS A GREAT PROGRAM FOR CERTAIN PROPERTIES!
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Some Information:
With a one to four unit dwelling:· You can purchase dwelling and land on which the dwelling is located and rehabilitate it.
· You can purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.
· You can refinance existing loans and rehabilitate a dwelling;
Property may be a "mixed use" residential property provided:
(1) 25 % (one story building)
49% (two story building)
33 % (three story building) of its floor area used for commercial (storefront) purposes;
(2) the commercial use will not affect the health and safety of the occupants of the residential property; and
(3) the rehabilitation funds will only be used for the residential functions of the dwelling
What is the minimum amount of repairs required on a FHA 203k home improvement loan?
There is a minimum $5,000 requirement of eligible home improvement loan projects on the existing structure of the property. Minor or cosmetic repairs may be included after meeting the first $5,000 worth of repairs.What are some of the repairs that qualify for the first $5,000?
- Structural alterations and reconstruction: (Repair or replacement of structural damage, chimney repair, additions to the structure, installation of additional bath(s), skylights, finished attics and/or basements, repair of termite damage and the treatment against termites)
- Elimination of health and safety hazards.
- Changes for aesthetic appeal: (New siding, adding a dormer, covered porch, attached garage).
- Air Conditioning or replacement: (plumbing, heating, air conditioning and electrical systems).
- Installation of well, septic system or connection to public utilities.
- Roofing, Gutter Downspouts, Flooring, Tiling and carpeting.
- Major landscape and site improvement.
- Iimprove accessibility and functions for the disabled.
What are the qualifications to be able to obtain a FHA 203-k loan?
The qualifications requirements are the same as a typical FHA mortgage loan. The only additional item that the borrower needs is either enough cash reserved to pay for materials and labor until they are reimbursed through a draw, or a credit card with an adequate available balance. If there is to be a contractor involved, the contractor may choose to cover these costs.
The interest rate on a typical FHA 203k mortgage loan is a little higher than a standard FHA or conventional 30/15-year fixed-rate loan. The cash requirements are the same as an FHA loan, 3 percent to 5 percent, which is less than a typical conventional loan. There are a couple of additional fees which pertain to the construction aspects of the FHA 203k loan.
Can I pick my own contractor to do the work?
You may decide on your own contractor, and they should be brought into the process in the beginning stage of the loan process. Check out the credentials of the contractor thoroughly, making sure he is knowledgeable in all aspects of rehabilitation work.
The home improvements or repairs need not be made before moving into the property, depending on how extensive the repairs are and whether the house is habitable while the repairs are being made. The home improvement loan provides the ability to include up to 6 months of mortgage payments in the improvement escrow, should you not be able to occupy the property and have to pay rent during rehabilitation.