When consumers use FHA financing, the most traditional source of funding is an FHA 203B loan. However, FHA 203B loans have specific requirements of a property for purchase; namely the condition of the property and habitability requirements. Typical requirement issues are a bad roof, a broken air conditioning system, leaking plumbing, failed septic tank or drain field, wood rot, termite damage…..the list goes on. In these cases, and others, the FHA 203k rehabilitation loan can be used to bring the house up to standards. Additionally, the 203K loan can be used for upgrades, flooring, painting, new appliances, cabinets, new windows, new doors and much, much more.
FHA 203K loans allow the buyer to roll in the costs of repairs to rehabilitate the property into the mortgage loan. There is no minimum amount of repairs/renovation costs and the maximum is only limited by the total loan not exceeding the FHA limit (currently $353,750.00 in Orange, Seminole and Osceola Counties) in the local area. The basic formula is quite simple. We take the sales price of the home, add the cost of the 203k repairs/renovation work and associated fees…come up with a total and provide a loan based on that figure. Currently, the FHA 203K loan amount is figured at 96.5% of that figure. The easy way to look at this is that we are financing the home and the repairs all at 96.5%…leaving the borrower only having to come up with a 3.5% down payment of the entire package. This way, there is no second mortgage, no equity line of credit and no additional closing fees for another loan. The renovation portion of the loan is added on to the primary note.
In addition to streamlining costly repairs for a property, an FHA 203K loan can be used for modernization of an existing home. This is useful for homeowners who want to update a kitchen or bathroom in a home that they purchase. These loans can also be used for room additions or other home expansion projects.
Due to the meticulous requirements and nature of FHA 203K loans, consumers should deal with a company that specializes in the product and has a department dedicated to the FHA 203k loan. FBC Mortgage, LLC is that company. FBC Mortgage, LLC 203k product is handled “in house”. We underwrite the loan ourselves, close and fund the loan ourselves as well as administer the draws to the Contractors ourselves. Our experience includes extensive construction knowledge ( a key component in understanding the required inspections, repairs, bid analysis, architectural plans and specifications as well as the ability to work with those in the Construction industry to ensure that the entire process and renovation are done as smoothly, quickly and efficiently as possible) as well as familiarity with the additional forms and agreements necessary for the loan to be properly underwritten and closed. We believe in educating the Real Estate community about the program and commonly hold 203k training classes and seminars for Real Estate Agents. Additionally, we assist the borrower and Realtor throughout the entire loan process in order to guaranty a successful and rewarding experience for all parties.
If you have any questions about the 203k loan and to see if it is the right loan for the home you are looking to purchase — or home that you currently live in and need to refinance and include the repairs, please contact our FHA 203k Manager, Ed Ross, at 407-872-3407.