Monday, November 12, 2012

The ABC's of 203k's

You don't have to be a victim of Sandy's wrath to get government help for home repairs and renovations. Whether you're a first time buyer looking for a great deal in a home that needs a little TLC, or you own a home that is overdue for an upgrade, a 203k loans may be the perfect solution. It's not a new program, having been around for over 30 years but, since it was streamlined in 1994, it is now far and away the fastest growing home repair loan program.

The Federal Housing Administration has specified that their 203k loans must be for improvements that cost at least $5,000, and work must be completed within 6 months. For small projects under $35,000 you may want to use a Streamlined 203k instead; the process is less cumbersome.

 If you underestimate costs, you cannot increase your loan amount so it's important to work with good contractors. Interest rates on FHA 203k loans are a little higher than other FHA loans (by about
1% or so), so you’ll pay more over the life of your loan.

Lenders have to do extra work to track your project and lock an interest rate for the longer application process. However, FHA 203k loans are guaranteed so lenders have less risk. Rates may still be lower than you can find without FHA backing.

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