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The FHA 203k Loan Program and How it Works

Posted by Mark Taylor | Posted in Arizona FHA | Posted on 23-11-2011

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A lack of home ownership in the United States was out of control before FHA loans came about. Needless to say, the FHA loan program was a godsend to potential home owners since its implementation 70 years ago. The program has played a pivotal role in helping Americans get the financial independence they need in order to finance a stable lifestyle after costly home property purchases.

The FHA allows potential homeowners to borrow loans for property purchases especially if they were not able to do so through conventional loan methods.  Other candidates that go looking for home loans usually include college graduates, newlyweds or students. FHA also allows loans for those people with questionable bank credits due to previous foreclosures or bankruptcy.

FHA 203K Loan Program

The most popular FHA loans that most potential home owners usually go for is the 203k mortgage loan. These types of loans are for properties that require some repair and are streamlined for those that need non structural repairs. 203k loans come in two types. In other words they are either modified or are streamlined. Either one of these can be used for refinance.

For regular 203k purchase loans the maximum mortgage amount is set according to less the cost of the property itself, rehab costs or 110% of the possible rehab price of the property after rehab.

In other words, an FHA 203k loan allows you to include this expense along with your loan amount. This includes material and labor. For example if your intended property happens to have a badly damaged (or removed) kitchen you could include the cost of new cabinets, a fridge, counter tops, dish washer, garbage disposal, flooring, stove and a microwave in the loan. Your loan can also accommodate a contingency reserve for expenses. You are also liable to get up to six months of mortgage payments while you are repairing the home as well. This means that you won’t have to pay double the housing payment while you rehab the home.

If major structural work is needed, HVAC issues addressed or you want to rebuild the whole home this can also be done with a 203k standard vs a streamline loan. . Needless to say, FHA loans and their value can never be underestimated.

If you need further information on an FHA Mortgage in Arizona or California please fee free to call me and my team at 602-361-0707 and thanks for reading my article: The FHA 203k Loan Program and How it Works

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