(This is a guest post)
The Federal Housing Administration of the United States offers a number of different programs to help homebuyers obtain financing to purchase a home. One of the more popular FHA programs is the Section 203k housing program. This program allows eligible homebuyers to obtain financing to purchase and renovate a home that meets the program’s qualifications. The FHA works with FHA-approved lending institutions to provide the loans to the individuals that qualify for the program.
203k loans can be used for purchasing various types of single-family properties and rehabbing them to make them fit for habitation. To meet eligibility requirements, the home must have been completed for at least one year and all newly constructed units must be attached to the existing property. The property can be a multiple family dwelling, but cannot house more than four families and cooperative units are not eligible. Homes that will be razed or demolished are only eligible if part of the existing foundation system remains in place throughout and after the renovations.
There are several ways that a 203k mortgage loan can be used. The buyer can use the loan to purchase a standing home and the land that it is on with the purpose of rehabilitating it. The loans can also be used to purchase a home that is located on another site and move it onto a new foundation on different property. The third use is refinancing existing loans on a property and obtaining funds to renovate that particular property.
There are also rules governing the type and amount of improvements that can be paid for with the loan. The program can be used to finance room additions, adding a deck, painting, or other types of physical improvements. Items and improvements that fall into the luxury category are generally not eligible as a cost rehabilitation. When making the home improvements, any renovations related to health, safety, or energy conservation must be completed prior to any general home improvement projects taking place.
The 203k program is considered to be an important tool for revitalizing communities and neighborhoods across the country and is strongly supported by the Department of Housing and Urban Development. FHA-approved lenders operate the program in partnership with non-profit organizations and state and local government agencies to expand homeownership opportunities across the nation. The provisions of the Section 203k program can be combined with other resources, such as a FHA Homepath loan, to help eligible borrowers as much as possible financially and help lenders meet their obligations under the Community Reinvestment Act.