Across Wisconsin there are a large number of short sale homes available to buyers. A short sale is a home being sold for an amount less than the existing mortgage balance. These homes often have a few cosmetic repairs that need to be made in order to make the home more presentable, if not safe. For years the issue of repairing a home prior to purchase was a catch 22. The bank or seller was not willing to spend extra money on a home that they are selling. The buyer could not make the repairs because they did not legally own the home. The FHA 203k loan solves that problem with ease.
Two Kinds of Loans
The Federal Housing Authority (FHA) offers a loan called the 203k mortgage, named after the code section where the loan is found in the FHA guidelines. This loan is offered as a Streamline version and the regular version. The streamline was designed to offer lower amounts designated for repairs and slightly less paperwork. Both loans are ideal for Wisconsin homebuyers who wish to purchase a home in need of some repairs.
How the Loan Works
The loan program allows buyers to purchase a home based on the sales price. In addition, the buyers can borrow extra money to make the necessary repairs. Once the loan is approved and closed, the extra money is placed in an escrow account. The contractor that is doing the work will receive payment once the work is completed. This protects the borrower and the lender against problems with the repair process.
The amount needed for repairs is added to the loan for the purchase and the homebuyer makes one payment, at one interest rate, on the entire loan. Since mortgage rates are so cheap right now it is a wonderful way to buy a home that may be priced below market value due to some simple fix-ups.
The Streamline 203k loan will allow Wisconsin homebuyers to borrow a minimum of $5,000 and a maximum of $35,000 to be used towards the repairs. The regular 203k loan allows much more as a percentage of the sales price and the estimated appraised value after the proposed repairs have been made. The regular 203k loan will need the involvement of an appraiser, home contractor and loan officer from the very beginning to make sure the loan and repairs meet the guidelines of the program
What Can be Done with 203k?
Wisconsin homebuyers often ask about the types of repairs that can be done with the Streamline 203k program. The following list shows some of the more popular tasks accomplished using this type of loan
- New gutters and a new roof
- New Heating and air conditioning system or repairs to the existing system
- Plumbing updates and repairs
- Electrical updates and repairs
- Bath and kitchen remodels, to a lesser extent
- New flooring of any type; wood, carpet, tile
- Painting for both exterior and the interior
- New windows and doors
- Energy efficient appliances
The 203K loan allows many types of repairs and improvements that can greatly enhance the value of a home and give buyers a chance to purchase a place at a savings. This loan is ideal for Wisconsin short sales or foreclosures.
This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a FHA lender directly to learn more about its mortgage products and your eligibility for such products.
Additional Mortgage INFO
- Getting Approved for an FHA Mortgage
- HUD/FHA $100 Down Payment Program
- Which Mortgage? FHA 203K or HomePath Loan
- Using FHA 203K Loan to Purchase a Fixer-Upper