Buy And Upgrade
Include the costs of upgrades into the loan, and put as little as 3.5% down. … read more
Home Improvement Loan
Remodel your current home, or simply add energy efficient upgrades. … read more
Reach More Buyers
Your distressed properties may qualify for 203k financing. … read more
- Benefits Of FHA 203k Loans
- 203k Loan Overview
- Myths About 203k Loans
- Rehab Loan Options
- Hiring A Lender
Miami, Florida FHA 203k Loans
FHA 203k loans allow buyers to purchase foreclosures and short sales that are sitting vacant due to any rehab work needed to make the property move-in ready.
In addition to minor cosmetic upgrades, this loan can be used to completely remodel most 1-4 unit dwellings, and borrowers can even finance in up to 6 month's (principal, interest, tax and insurance) payments to avoid having to worry about additional housing costs while the property is being renovated.
Main Benefits Of 203k Loans:
- Finance Upgrades - Cosmetic to structural renovation work.
- Get What You Want - Buy a property, turn it into a home.
- Increased Values - Improve the re-sale value and save money.
- Energy Efficient Upgrades - Save on utility expenses.
- Low Downpayment - As little as 3.5% of the purchase price for FHA 203k loans.
- Perfect "Fixer-Upper" Loan - New paint, carpet, kitchen remodel... and the list goes on.
- Discounted Listings - Get a better deal when buying an ugly property that needs a little TLC.
As long as you have an experienced team of 203k lenders, consultants and contractors working for you, a rehab loan is an option you may want to explore.
203k Loan Overview
Established by the Department of Housing and Urban Development (HUD) in a 1978 official amendment to Section 203k of the National Housing Act (NHA), this mortgage program was intended to serve as important tool for community and neighborhood revitalization, as well as for expanding homeownership opportunities.
Bottom line, this program helps preserve neighborhood real estate values, as well as creates employment opportunities for local contractors.
FHA's primary goal is to help borrowers purchase a home they may not otherwise be able to finance based on the down payment requirements of most conventional loan programs. To further that goal, FHA offers favorable loan terms, higher loan limits, and flexible down payment options to qualified buyers.
While candidates are not required to have as large a down payment or the income amounts mandated by many conventional loan programs, they will need to show evidence of a steady, verifiable income and a good credit history.
Credit qualification, loan limits and other requirements for all FHA 203k loans are the same as standard FHA loans. Borrowers must demonstrate the willingness and ability to repay the loan. Like standard FHA loans, maximum loan amounts depend on the property's geography (city, state, county).
The distinct difference between standard FHA loans Miami, FL and the 203k programs is that 203k rehabilitation loans are specifically designed to offer loans on distressed, outdated, uninhabitable or poorly maintained properties that may be unable to qualify for conventional loan programs.
In addition to the purchase price of the home, the FHA 203k loan allows the borrower to project costs and include the funds needed for the rehabilitation and related expenses, such as materials and labor.
Common FHA 203k Loan Terms
Don't let a few new vocabulary terms overwhelm you about the process, it's your 203k lender's responsibility to clearly articulate everything you need to know about in a manner that you can clearly understand and trust.
Simply put, a rehab loan is basically a construction financing program that involves a few other components and team players.
For your reference, we have listed a few of the most common rehab loan terms below.
The 203k Contingency Reserve is a padding of additional funds, typically in the amount of 10%-20% of the total cost of the renovation. The lender will require a Contingency Reserve to cover overrun costs if the project goes over budget.
If the scope of work is relatively simple and repair costs are below $7,500, the lender may waive the reserve requirement. Subject to lender approval, the borrower may use unspent funds from the Contingency Reserve account to perform additional property improvements; otherwise, the monies must be applied to pay down the mortgage principal.
Draws and Inspections:
A draw is an approved release of funds to the contractor. The first draw will not be scheduled until the lender has determined that the applicable building permits have been issued.
Thereafter, inspections are performed by the HUD Consultant or HUD-approved lender's staff prior to the approval of a draws. Each inspection will determine whether or not the work has been completed and is compliant, and will indicate approval for funds to be released.
FHA 203k Consultant:
Borrowers who choose the full, standard 203k will partner with a HUD Certified Consultant on their loan.
The HUD) 203k Consultant's job is to provide knowledge and guidance during the renovation, and is tasked with protecting the homeowner and ensuring that the renovation is completed according to the homeowner's wishes.
A 10% holdback is required on each release from the Rehabilitation Escrow Account on all Standard 203k loans. The total sum of all holdback funds will be paid out only after the final inspection and release of the Final Notice.
The Streamlined 203k loan is designed with only two draws, and holdbacks are not applicable.
Lender Work Write-Up:
For the full FHA 203k loan, the HUD Consultant will prepare a detailed description of the property repairs needed. Using detailed line item descriptions and pricing, the Work Write-up will include the borrower's desired upgrades, as well as what will be required to satisfy the lender, FHA, and building code compliance.
Mortgage Payment Reserve:
Funds equal to six mortgage payments plus mortgage insurance (MI) can be included to cover monthly mortgage payments if the property will not be livable during the rehab project.
Mortgage Insurance (MI):
Two types of mortgage insurance may apply to a 203(k) transaction: An Upfront Mortgage Insurance premium, and a monthly mortgage insurance premium.
The Upfront Mortgage Insurance (UFMIP) is a one-time loan insurance fee collected on behalf of FHA at the close of the transaction. In addition to the UFMIP, a monthly mortgage insurance premium (MIP) is due on all FHA transactions.
Rehabilitation Escrow Account:
After the transaction is closed, the loan proceeds and the contingency reserve are placed in an interest bearing escrow account.
The lender will release funds through a draw at pre-specified stages in accordance with the Work Write-Up.
Scope of Work:
HUD 203k Consultant will use the Lender Work Write-Up to prepare a detailed Scope of Work designed to help contractors return the best bids possible.
Myths About Getting a Rehab Loan
Even though the FHA 203k loan provides significant benefits to property values and employment opportunities, many local real estate professionals are reluctant to pay attention to these government insured rehab loans due to the misconception that they are impossible to close on time.
Yes, it is true that FHA 203k loans require an experienced team of renovation lenders, real estate agents, consultants and contractors to ensure a successful closing.
However, most real estate transactions require a certain level of experience to protect buyers and sellers, which is why you should strongly consider hiring a Rehab Loan Expert to help guide you through the qualifying and funding process.
If your current real estate agent does not have anything good to say about 203k loans, then please have them Contact Us about our Rehab Loan Training and Certification seminars. We're obviously very passionate about rebuilding the real estate market, and we believe education is the key to helping this program take root in our community.
Delays, confusion, endless paperwork, government interference, exorbitant costs, shady contractors, disappearing lenders, clueless real estate agents and disillusioned sellers who pull out of a deal…
These are a few of the falsehoods and myths about the 203k that are unfortunately getting undue media buzz and keeping qualified borrowers from purchasing or refinancing their dream home with the FHA 203k loan.
The 203k Is Not Just A Rehab Loan
One myth is that the 203k is only a rehab loan. Yes, it can be used to renovate a distressed property, but this unique loan is also ideal for undertaking a kitchen or bath remodel in an already-desirable home.
From structural renovations and repairs to wish-list improvements like carpet, cabinets and tile, this government-sponsored loan program allows the borrower to include their remodel expenses in one single, efficient FHA mortgage. The absolute best point about the 203k is that this loan allows you to borrow money based on how much the home will be worth AFTER the repairs have been completed, which means instant equity.
In many areas of the country, a 203k loan is helpful if you need water damage and mold remediation.
Time Is On Your Side!
Although some 203k loans may take a week or two longer than a conventional mortgage, depending on the type of renovation work required, our rehab loan experts can close the average FHA 203k in 30-45 days.
The fact is, a typical 203k should close in roughly the same time frame as most other loans. The secret is working with an experienced lender with a network of Certified Consultants and proven, qualified Contractors who are familiar with and knowledgeable about the 203k process.
The 203k Requires Too Much Paperwork
While more paperwork is required, the documentation process isn't tedious if you are working with an experienced Renovation Team that knows the ropes. Keep in mind, almost every mortgage requires a bunch of paper-chasing.
Borrowers must work with FHA 203k experts who know the loan, understand the process, and are proactive about producing and processing the required paperwork and effectively moving the loan forward.
Bottom Line: Most borrowers and agents who report a bad encounter with the 203k did NOT work with a trained, certified, knowledgeable Renovation Team who had their best interests in mind.
You don't need to travel the same road! Choose a Florida 203k lender with an established track record who fully understands government requirements, who has excellent Contractor and Consultant contacts and who can guide you through the ultimate myth-busting FHA 203k loan experience.
Rehab Loan Options
There are many types home improvement and construction loans that are created to help homeowners or buyers renovate a property.
This site is dedicated to providing a comprehensive online educational resource that focuses specifically on FHA, Fannie Mae and Energy Efficient Mortgage programs.
The following list outlines a few of the most popular home improvement loans, along with a link to a related page that will give you more information:
FHA 203k Streamlined Limited Repair Program
Basic cosmetic (non-structural) repairs and property upgrades. FHA's Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.
FHA 203k Standard Full Structural Loan
The Standard 203k was created specifically for projects that warrant extensive work or repairs, projects that will take longer than six months to complete, or when rehab costs will exceed $35,000. This option must be used when a property requires (or the borrower requests) structural work, such as a room addition or the removal or relocation of an interior or exterior wall.
Additionally, Standard 203k loans have no maximum repair amount.
More Info: FHA 203k Full
Fannie Mae HomePath®
HomePath Mortgage allows a buyer to purchase a Fannie Mae-owned property with a low down payment, no lender-requested appraisal and no mortgage insurance. Expanded seller contributions towards closing costs are allowed. The one loan amount includes both the funds for the purchase and renovation — up to 35% of the as completed value. Available for owner occupants and investors.
FHA's Energy Efficient Mortgage program (EEM)
FHA's Energy Efficient Mortgage program (EEM) helps homebuyers or homeowners save money on utility bills by enabling them to finance the cost of adding energy efficiency features to new or existing housing as part of their FHA insured home purchase or refinancing mortgage.
Hiring An Expert 203k Lender:
There is a big difference between Saying you're the Trusted Resource for Renovation Lending, and actually Proving it.
RehabLoanNetwork.com is a national expert network of 203k lenders who specialize rehab loan programs that provide homebuyers special financing options for fixing up properties.
By organizing a dedicated group of qualified Rehab Lenders, 203k Consultants, Contractors and Real Estate Agents in one centralized community, we can better serve our local clients, transaction partners and the real estate market by providing our members with:
- Extensive Training on guidelines, underwriting & processing systems.
- Breaking News on important updates that relate to lending portals.
- Networking with other Renovation Lending Experts.
- Coaching to improve service, communication and efficiency.
- Accountability to ensure the integrity of our network.
We believe that with the proper education and community involvement, the FHA 203k loan program can stabilize the real estate market and create employment opportunities for the construction industry.
Speak With 203k Lender - We'd love to answer your questions or analyze your project.
Apply Online, or call us directly at (888) 450-9639 to speak with an approved rehab loan expert.