Many people who are shopping for Arizona homes have found that many of the properties available for sale are either bank owned properties (lots of Phoenix banks have lots of inventory) or short sales. One person I spoke with recently was shopping for Tempe homes for sale that needed a little work. When buying a bank owned property or a short sale, chances are that the home is going to be in need of at least a few repairs — and many times, the most popular loan option for this scenario is the FHA 203k loan.
FHA 203k Program Highlights
The FHA 203k streamline loan has become in demand with the slowdown in the housing market. When a property is owned by the bank, chances are that the property may be in need of a little work and the FHA 203k streamline program is a great option. Some of the frequently asked questions we see about the FHA 203k loan include:
What is the FHA 203k mortgage?
The FHA 203k mortgage loan is a rehabilitation loan that works much like a development loan. The one who is buying the home is able to buy a home that is in need of repairs and is able to mortgage the repair work in the mortgage to fix items in the house. The FHA 203k loan consists of the purchase price of the home plus the construction costs for the work to be performed after close.
An FHA 203k Example Situation:
$100,000 purchase price of home
$20,000 Repairs Needed (see a list of the most common FHA 203k repairs)
$120,000 Total Loan Amount
The offer is the purchase price of the house only. You don’t need to include the cost of repairs anywhere in the sales contract or offer. In the above example, the purchase price on the sales agreement or offer would be $100,000.
Is the FHA 203k loan harder to qualify for than a traditional FHA loan?
Getting an FHA 203k loan is roughly the same as getting a regular FHA loan. What does it take to qualify for an FHA loan? Generally speaking, a credit score above 620, a good job and a down payment of 3.5%. Of course there are more details to being able to qualify, but those are the general highlights.
How do I find a contractor to do the repairs?
It is suggested that you work with a general contractor that can perform all needed repair work. Your loan officer can easily help recommend one they will need to know at least one good contractor. It is also vital that the contractor be practiced in FHA guidelines so that they can include any FHA required items in their contract.