I wonder why you have wired your money without having an executed contract. I don't deposit any money and will not advice my buyer to do so without having an executed contract in my hand. You will not lose your money because the title company holds it but you don't have the home as there's no contract. I would circle back with your agent and ask for clarification.... more
In general, an FHA 203k loan allows you to wrap your renovation costs into your mortgage with one loan and one closing. The amount you borrow is a combination of the price of the home and the estimated price of the repairs, including labor and materials.
Your down payment of 3.5 percent (the minimum required by the FHA loan program) will be based on the full loan amount and, of course, your monthly payments will be higher since you’re including repair costs in the same loan.
You’ll need to qualify according to the standards of your lender, typically with a credit score of 640 or higher and with a maximum debt-to-income ratio of 43 percent, including the new monthly payment. The full loan amount must be at or below the maximum limit for FHA loans in your area, which in many housing markets is $417,500.
How FHA 203k Loans Work
There are two types of 203k loans: a streamlined version and a regular version. The streamlined 203k program is meant for homes that don’t need structural repairs and are capped at a maximum of $35,000 in repairs. No minimum amount of repairs must be made. Traditional 203k loans have a minimum requirement of $5,000 and can be used for structural repairs. Both loan programs require the repairs to start within 30 days of the loan closing and to be completed within six months.
The FHA has specific guidelines about types of projects you can finance with a 203k loan, but generally the only home improvements that you can’t finance are luxury items such as adding a swimming pool.
You mention that you are a first time homebuyer, and I see that you have a couple of responses from mortgage brokers. If you are looking for a Realtor, please contact me and we can discuss in more detail what you're looking for in a house.
Caney Arnold, Realtor
Real Estate EBroker, Inc.... more
Excellent response below from "Home Inspector" for a detailed description of the 203k loan program.
Here's an overview:
The FHA 203k Program allows a Buyer to purchase a home and obtain the monies for repairs or home improvements all rolled into a single loan with a SINGLE monthly FIXED RATE payment. The repairs can cost as little as $5,000 or can run as high as necessary to gut-rehab a home. The limit on
the repair monies that can be included in the loan is the Loan-To-Value (LTV) Limit based on statutory FHA Loan Limits in your area. And this LTV percentage is calculated based on the value of the house AFTER improvements. In other words, the appraiser determines a value for the property after taking into account your proposed improvements and the Underwriter at your Lender approves the loan based on that higher amount (assuming the "AS-IS" value equals or exceeds your actual purchase price).
The 203k program even has a provision allowing the Buyer to request that up to 6 months worth of mortgage payments be included in the loan so they donâ€™t have to pay two monthly housing
expensesâ€”rent and mortgageâ€”while the house is under construction.
This is a superb program, but I have two cautions for you. First, this loan is difficult to obtain an approval for in the current lending environment. Be sure you're working with an experienced and local Mortgage Banker to assist you with this financing. Second, if you are a First Time Buyer, understand that you are about to become a General Contractor, too. You'll have a Licensed Contractor working for you to undertake the construction, but you'll need to be watchful that everything is going according to plan. You have to ask yourself before you purchase a home with the 203k program if you are ready for the additional time, work and patience needed to see this through. If your lifestyle, family responsibilities and/or work responsibilities prevent you from dedicating a lot of time to this project, I'd recommend buying a house that doesn't need work with a regular mortgage loan.
I am Broker in Carson, 90746. House in that price range almost impossible, however, 2-3 bedroom townhouse with attached garage could happen. I know of 2 bedroom, 2.5 bath for 110,000 in 90745 area. If I can be of help, let me know.... more
Technically you can use the $8,000 federal tax credit for closing costs, but in reality there are no agencies providing a bridge loan for this. You don't get this $8,000 until you close escrow and request it from the IRS.
3% for closing costs is a pretty good rule of thumb on a FHA or VA purchase loan. But a higher purchase could be less than 3% and a lower purchase price could be greater than 3%. FHA and VA loan closing costs (and conventional loans with... more