- December 5, 2018
- Posted by: John Vecchitto
- Category: Connecticut
FHA 203K Loan Program
An FHA 203k loan permits home buyers to finance repair or improvements into their mortgage. This can be done for either a purchase or a refinance. Borrowers are also able to utilize this loan type for both single and multi-family properties.
There are two types of FHA 203k Loans: Standard/Rehab (minimum $5,000 up to FHA maximum loan amount) & the Streamline ($0 – $35,000…up to FHA maximum loan amount). The FHA 203k Rehab loan is more like a construction project, and the FHA Streamline 203k Loan is for more minor improvements.
What are the benefits of using an FHA 203k Loan?
The purchase of a house that needs repair is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete. As well, the repairs can’t be done until the house has been purchased. HUD’s FHA 203k loan program can help you with this quagmire.
Even more, the mortgage loan interest on the FHA 203k loan qualifies for the mortgage interest tax deductions like all other mortgage loans. So, the interest that the borrower pays on this “construction” can be all tax deductible! Furthermore, the FHA 203k loan program improves the local real estate market. This is due to the property being improved and not just purchased.
Because of the improvement requirement with the FHA 203k loan program, real estate values are increased, which helps other homeowners in the same neighborhood, invigorates communities, creates work for contractors and commerce is conducted by the purchasing of goods and services. Simply put, the FHA 203k loan program improves everything associated with it.
What types of repairs and/or modifications are acceptable for an FHA 203k Loan?
First of all, any repairs/improvements/modifications/modernizations that add value to and/or improve the property are acceptable for an FHA 203k Loan. The improvements must comply with HUD’s Minimum Property Standards. Furthermore, structural modifications and any work in excess of $35,000 are NOT allowed for the FHA 203k Streamlined Loan. In contrast, the FHA 203k Rehab does allow for structural modifications for work in excess of $35,000. Luxury items such as swimming pools, BBQ’s, Gazebos, spas, etc. are not allowed for either. However, limited pool repair (max $1500-subject to lender approval) is allowed under both versions of the FHA 203k loan. Allowed repairs:
· Energy Efficient upgrades (windows, insulation, solar systems, etc.)
· Repair/Replacement of roofs, gutters and downspouts
· Repair/Replacement/upgrade of existing HVAC systems
· Repair/Replacement/upgrade of plumbing and electrical systems
· Repair/Replacement of flooring
· Kitchen remodeling
· Painting, both exterior and interior
· Weatherization, including storm windows and doors, insulation, weather stripping, etc.
· Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
· Accessibility improvements for persons with disabilities
· Lead-based paint stabilization or abatement of lead-based paint hazards
· Repair/replace/add exterior decks, patios, porches
· Basement finishing and remodeling
· Likewise, basement waterproofing
· Window and door replacements and exterior wall re-siding
· Septic system and/or well repair or replacement
· Finally, structural repairs/modifications (moving walls, repairing foundations, etc.)
Please call me for a free consultation to talk about your financing on your upcoming home repair loan. Also, the pre-approval process is easy. I look forward to hearing from you.
John Vecchitto / Loan Officer
210 S. Main St. First Floor
Middletown, CT 06457
860-788-7237 (Office Phone)
Company NMLS 117273
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