subject: What Is A 203k Loan? [print this page] Everyone knows that the United States is in a time of economic struggle connected to bank lending and home ownership. The Housing and Urban Development, or HUD, department of the federal government is a key player in fixing the problem that has been created. Responsible for 203k loans and much more, they are the first place home owners struggling with mortgages go to get help.
The FHA, or Federal Housing Administration, is a subdivision of the HUD. Started in the 1930s to cope with Depression era home foreclosures, this is the subgroup that gives loans to homeowners and prospective homeowners. These are also the people in charge of determining what is a livable environment and what is not.
Started in 1934, just five years after the stock market crashed in 1929, the FHA was created to deal with a situation much like the one our country faces today. During the Depression, more and more people were unable to pay their mortgages and thus lost their homes. The government responded by creating the FHA to support and encourage home ownership during tough economic times.
The term 203 loan comes from the part in the FHA manual that pertains to this kind of loan. Section 203 loans are for houses that need rehabilitation in some form before they can be lived in. These loans offer prospective home owners or those seeking to refinance the money they need to improve their living environment and increase the value of the home.
The 203k loan, listed under section 203 and subsection k in the FHA manual, is for houses that need more work before they are ready to be lived in. These loans help prospective homeowners get their house fixed up before they move in. A 203k loan can also be gotten by folks who already have a house but need to refinance.
Since this is a federal loan, there is lots of paperwork that has to be done if you are interested in getting this kind of loan. You will need to document the current condition of the house as well as how much you expect repairs to cost. You may also need to have a home inspection completed.
The idea behind all this reporting is for the government to give you just as much money as you need to make your dream house a possibility. Or, if you are refinancing, the government is trying to keep you in your home rather than have it go to foreclosure.
You may have heard of streamline 203k loans. They're a little different from regular 203k loans in that they are for smaller repairs and the loans are not allowed to exceed $35,000 in most counties. Talk to your local FHA office to determine what kind of loan is best for you.
