• Renovation Loans by Money Street Mortgage

     Home buyers who buy an older home or foreclosure often are frustrated by
    the difficulty of financing needed repairs and renovations. But a Federal Housing
    Administration home loan program offers some help.

    A Section 203(k) loan allows borrowers to wrap the cost of repairs and improvements
    into a single mortgage.

    We’ve seen tremendous growth in the use of these loans across the country, especially in
    areas where the housing supply is older or in need of repairs or when people are buying foreclosures
    and short sales.

    The 203(k) loan is a boon for cash-strapped homeowners who either cannot or do not want to
    tap their home equity. It also offers an alternative to borrowers struggling to find other sources
    of financing.

    There are two types of 203(k) loans. The first, and most common, loan is known as a
    Streamline 203(k) and is restricted to repairs or improvements that total $35,000 or less.

    The second type of 203(k) loan applies to improvements costing more than $35,000.

    A 203(k) loan requires a minimum of $5,000 to be spent on rehabilitation of the home.
    Generally, the maximum mortgage amount depends on the lesser of the borrower’s approval limit,
    the FHA maximum mortgage limit for the area or 110 percent of the appraised value of the improved
    property

    Loan restrictions

    While 203(k) loans may be a great option for many homeowners, they also come with some restrictions.

    For example, 203(k) loans can be used for refinancing as well as purchase loans, but are limited
    to owner/occupants.  Investors are not eligible.

    In addition, work has to begin within 30 days of closing and be complete within six months.
    The borrower is allowed to be the contractor if qualified, but cannot be paid for anything
    outside the cost of materials and must meet specific FHA qualifications.

    If a contractor is being used, be sure to ask if they have done 203(k) programs before.

    The contractor needs to understand the payment schedule and requirements.

    Renovation Loans by Money Street Mortgage