FHA 203K Refinance - How does it work?
1st - You must pay off your existing debt in the new mortgage.Â This means ALL debt that is secured with a lien on the house. In addition, no other liens or encumbrances can exist on the deed. (mechanics liens, back taxes, judgements).Â They all must be included in the new loan.
2nd - ALLÂ the Fees can be wrapped into the loan.Â Yes, you will have to pay for some incidentals up front - About $1,000.00 or so, depending on the size of your renovation, but you can get these funds back at settlement.
3rd - Your new mortgage is based on your "improved value", so if you $200,000.00 on your mortgage currently, and it is worth about $250,000.00, not much room in equity.Â BUT...Â if after putting a 3 room addition on, costing $100,000.00 -Â This house will now appriase for $375,000.00, you are in good shape.Â We are only looking for the final number to cover your total loan amount. ;)
Lost Count , NEXT - You have the option to even escrow mortgage payments into your loan, in case you can not live in the house during construction and have to live elsewhere.
Then - When you settle, the construction funds are held in escrow and your contractor will submit for draws through your appointed 203k Consultant.Â
Finally - When all the work is done, you have an FHA mortgage.Â Do nothing and you are fine.Â Have 20% equity now and REFINANCE to a conventional loan to drop the Mortgage Insurance.Â (this typically can not happen until 6 months after the closing).
Easy - Breezy!Â
Fha 203k - Versitile Residential Renovation LoanÂ
Save yourself time, energy, frustration and money ...Â
Work with Experience.