FHA 203K loans are perfect for those of us who fall in love with a great house that has this Gosh Awful Shag Carpet! This carpet would give you a headache! How can you buy the house if you don’t have an extra $5000 to update that 1970’s carpet, green countertops, and linoleum?
If the property is under the FHA loan limit in your county, you can purchase it with a FHA 203K loan.
Let’s say you negotiate a sales price of $100,000. With a traditional FHA mortgage loan, you would need to put 3.5% of the $100,000 into the down payment.
With this special FHA 203k Renovation mortgage program, designed for REHABS, you can add up to $35,000 for “updates.” This means that if you negotiate a price of $100,000 and you need an additional $5000 for the updates… we base the 3.5% down payment on $105,000!
It’s a GREAT program for folks who need to update a property! The main things to remember about the FHA 203K loans in NC are:
- You can add a minimum of $1000 to the purchase price for improvements, including appliances.
- You can not change the “footprint” of the house.
- You can not borrow more than $35,000 for improvements.
- The property must appraise for the improvements plus the purchase price, or “after improvement” value.
- Qualifying is the same as with traditional FHA loans, so you need to have at least 2 credit scores above 660.
- The after improvement value can not exceed the maximum loan amount for your county.
- The checks for improvement will be going directly to the entity doing the work, only in RARE occassions will this be the homebuyer.
- Great loans for folks purchasing foreclosed property!
- FHA is not a loan for Investors, with the exception of those purchasing a HUD foreclosed property – when HUD allows an FHA mortgage as part of the contract.
Ineligible Improvements/Work for FHA 203K loans in NC
- Major rehabilitation or major remodeling, such as the relocation of a wall
- New construction (including room additions)
- Repair of structural damage
- Repairs requiring detailed drawings, plans or architectural exhibits
- Landscaping or similar site amenity improvements, including fence
- Lead-based paint stabilization or abatement of lead-based paint hazards
- Any repair or improvement requiring a work schedule longer than three (3) months; or Rehabilitation activities that require more than two (2) draws/payments.
- Any work requiring a plan reviewer
- Result in work not starting within 30 days after loan closing; or cause the borrower to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted (FHA anticipates that, in a typical case, the borrower would be able to occupy the property after the mortgage closing.