subject: Benefits Of The 203(k) Loan Program In Home Repair [print this page] Purchasing or no cash out refinancing of an existing home which belongs to loan amount limits of traditional FHA loans are made available by a renovation loan known as the 203(k) program.
The program includes rebuilding or renovating an existing property which is limited to the use of at least a portion of it. Replacement of appliances may also be included as long as the minimal amount for rebuilding the property is $5,000.00.
The appraisal of the work completed will determine the amount of the loan. The appraisal provides the future value of the home. Actual guidelines stated in the FHA allow loans up to 110% of the future home value but this was reduced to 103%. The 203(k) program has two versions: a full 203(k) and the other one is a streamlined up to (35k).
On the first version which is the streamline 203(k), HUD states that anyone involved in the transaction such as a contractor, loan officer or processor, Lompoc real estate agents, appraiser or seller is prohibited to have any relationship with the borrower. Upon signing the form, both parties certify that theres no relationship between them.
Lets site an example of a borrower who wants to purchase his or her parents property in one of the homes in Lompoc. This will not be allowed by the streamline 203(k) loans, which in this case is not very agreeable.
The main goal of Streamline 203(k) loans focuses on improving the property. Repairs will not always be a requirement. The borrower may want to replace the flooring, repaint the house or replace some of the appliances, but repairs cannot be done. This will also be applicable if you want to purchase one of the Lompoc homes for sale once you found a great deal.
The main issue here is whether the property appraisal value will cover improvements and/or repairs or not. Conflicts may arise since repairs done will require an increase in the value of the home to justify the propertys cost with the new loan.
