View Full Version : FHA 203K Loans, for New and Existing Homes:

Ralph Spurlock
08-12-2011, 07:00 AM
The Federal Housing Administration offers single family mortgage
insurance programs and operate through FHA approved lending
institutions. These banks fund new and existing home loans that are
insured through Federal Housing Authority (FHA). The Section 203(k)
program is the Department's primary program for the rehabilitation and
repair of single family properties. As such, it is an important tool for community and neighborhood revitalization and for
expanding home ownership opportunities. Since these are the primary
goals of HUD, the Department believes that Section 203(k) is an
important program and we intend to continue to strongly support the
program and the lenders that participate in it.

Most bank mortgage financing provide only permanent financing. This
means that when a potential buyer wishes to buy a home in need ofrepair
the buyer in most cases is required to affect the repairs before the
lender will fund the purchase with a permanent mortgage on the
property. So, When a buyer wishes to purchase a house in need of repair, or modernization, the buyer usually must obtain financing first to purchase the dwelling next additional financing to do the repairs and after the work is completed, permanent financing to pay off the interim loan which was granted to do the repairs. Often the interim financing to purchase the property and do the repairs or modernization(s) involves relatively high interest rates and short amortization

The Section 203(k) program was designed to address this situation. The
borrower can get just one mortgage loan, at a long-term fixed or adjustable rate thereby finance both the acquisition and the rehabilitation of the property. Funding for the permanent mortgage amount is computed on the projected value of the property with the repairs and/or property upgrades
completed. HUD under203K will endorse-insure the mortgage amount in total including the cost of repairs when the lender closes and funds the buyer.