What are my home financing options? Part 2
Learn the FHA home financing options available to you.
For potential homebuyers who are unafraid to tackle a home renovation, the FHA 203k Mortgage Program may be an option. This program allows the buyer to finance both the purchase price and cost to rehabilitate the home into one mortgage. This loan option covers the borrower and the lender by insuring the home before completion of the rehabilitation.
During the acquisition process, the borrower is responsible for obtaining the cost to repair the home, preferably by a certified, licensed, reputable contractor. The repairs on the home can include the home being totally razed as long as the foundation stays intact to repair of the major structural issues a home may have and is not limited to the following:
- Heating & cooling
- Bathroom remodel
- Disability access
- Room additions or finishing of a basement or attic space
Typically, the Lender makes the decision as to what repairs may be allowable within the loan.
The amounts of money that are used in rehabbing the home are placed into an escrow account and are released as the work is completed. All work on the property must be completed within six months. While a borrower is renovating or rehabbing the home, Michigan State University Extension reminds the borrower that it is imperative that all receipts be kept to account for all the funds being used on the home.
This option can also be used for existing homeowners who wish to rehabilitate their home.
The amount of money that can be borrowed under this program is limited to the FHA mortgage limit of the area where the home is located. The cost of the repairs must be at least $5,000. Potential homeowners should be aware that Lenders may charge higher additional or supplemental fees in connection with this loan.
This loan is versatile in that it can allow a borrower to finance the conversion of a one-unit property into a multiple four-unit property.
Potential homeowners who feel that this option may be for them can start by contacting an FHA approved Lender for more details.
Homeownership financing does not have to be limited to move in-ready condition homes. Borrowers who wish to turn a derelict home into their own piece of the American Dream can do so with the help of the FHA 203 k mortgage program.
Other articles in this series: