The FHA 203K Can Be Used For Purchases And Refinances
Let’s look at the option of refinancing into a FHA 203K loan.
Most home loans use the homes current appraised value to determine the loan amount. In today’s world that leaves many of us with very little, if any equity at all. This makes it very difficult (impossible) to use your homes equity to fund renovation projects or remodels.
What if there was a home loan that took the future value of the home after the improvements were made? THERE IS!
You must have at least 2.25% equity in your home before the refinance, so this does not help those of us underwater. How ever if you do or are close enough to pay the loan down to get to that point then the FHA 203K or 203K streamline may be right for you.
Most of us don’t have extra cash laying around for renovations and as mentioned it is difficult to tap your homes equity. We don’t see equity lines as an answer any more as the credit standard have tightened. Equity lines and most other home loans have restrictions on the loan to value at which they will lend. At today’s levels they are not very helpful to the mass public. At least in terms of getting cash out to repair and modernize your home.
The FHA 2o3K allows you to wrap in the costs of the loan, your renovation costs and pay off your existing loans on the house. This leaves you with one shiny new loan up to 97.75% of the value and a beautiful home. Keep in mind this is 97.75% of the value after the remodel is completed so the loan amount will be higher than your current loan. The 203k is a 30 year fixed so there are no adjustment to worry about. Your taxes and insurance will be paid with the monthly payments, so if you do not have this currently you’ll need to consider how much your monthly obligation goes up, but if you find it manageable then this may be the answer you have been looking for.
Appraisals will show the underwriter any repairs needed. Normally someone would need to repair any issues before the loan can close. This would me self financing the repairs. With the 203K these repairs can be financed in the loan and completed after the loan closes! Other restrictions and qualifications apply so contact me for more details, BUT this loan may just be an answer for a lot of people who would like to use their equity to complete renovations/modernizations to their home and cannot self finance the costs.
Thank you,
Matt Steinmetz nmls# 221315
Envoy Mortgage
2151-A2 Salvio St.
Concord, CA 94520
Office: 925-671-9501 x119
Fax: 925-671-9512
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