Arizona FHA 203k Loans For Rehab Properties

Arizona FHA 203k Loans For Rehab Properties

Are you shopping for Arizona homes for sale? Chances are that you are coming across many that are either a short sale or bank owned and are in need of repairs.
The FHA 203k loan program has become fashionable with the recession in the housing market. When a property is owned by the bank, chances are that the property may be in need of a little work and the FHA 203k streamline program is a great option. Some of the frequently asked questions we see about the FHA 203k include:

 

  • What exactly is an FHA 203k loan?

 

 

  • An FHA 203k Examples

 

 

  • Is the FHA 203k loan harder to qualify for than a traditional FHA loan?

 

 

What exactly is an FHA 203k loan?

The FHA 203k mortgage is a rehab loan that works much like a development loan. The buyer of the home is able to acquire a home that is in need of repairs and is able to finance the repair work in the mortgage to correct items in the house. The FHA 203k consists of the purchase price of the home plus the construction costs for the work to be performed after close.

An FHA 203k Example:

      • $100,000 purchase price of home
      • $20,000 Repairs Needed (see a list of the most common FHA 203k repairs)
      • $120,000 Total Loan Amount

How much are you supposed to write the contract for? With FHA 203k loans, the offer is the purchase price of the home only. Be sure not to include the cost of repairs anywhere in the sales contract or offer. In the above example, the purchase price on the sales agreement or offer would be $100,000.

Is the FHA 203k loan harder to qualify for than a traditional FHA loan?

Getting an FHA 203k loan is roughly the same as getting a regular FHA loan. What does it take to qualify for an FHA loan? Generally speaking, a credit score above 620, a good job and a down payment of 3.5%. Of course there are more details to being approved, but those are the general highlights.

How do I go about finding the right contractor for the work?

It is highly recommended that you work with a general contractor that can perform all needed repair work. Your loan officer can easily help recommend one – they should know at least one good contractor. It is also valuable that the contractor be experienced in FHA guidelines so that they can include any FHA required items in their contract.

Seller Concessions on FHA Loans

Seller Concessions on FHA Loans

If you are thinking about getting an FHA loan, chances are that you have at least heard the words “seller concessions” during the process.

  • What are seller concessions on FHA loans?
  • What are not?
  • Which esxpenses?

What are seller concessions on FHA loans?

Seller concessions are things that the seller agrees to do if you purchase their home. Seller contributions are limited to 6% of the purchase price. Seller contributions exceeding the 6% limitation must result in a dollar-for-dollar reduction in sales price when calculating the maximum mortgage amount.

What are not?

Perhaps it is easier to identify what seller concessions *are not* – because these items involve something that is *not* considered a seller concession — rather an “inducement to buy” which is not allowed.

Which expenses?

Certain expenses paid by the seller and/or an interested 3rd party to the transaction, on behalf of the borrower, are considered “inducements to purchase” and result in a dollar-for-dollar reduction to the sales price of the property before applying the maximum LTV factor. These expenses include:

  • Seller Contributions exceeding 6% of the sales price;
  • Contributions exceeding the actual cost of prepaids, discounts, and other financing concessions;
  • Decorating allowances;
  • Repair allowances;
  • Moving costs;
  • Personal property inducements (not considered part of the real estate for the area (i.e., car, boat, riding lawn mower, furniture, television, etc); and Other costs determined inappropriate by HUD. Sales commissions paid by an interested 3rd party on a borrower’s current residence can be considered an inducement to purchase, and should be subtracted from the sales price before applying the maximum LTV factor.

Any Questions?

Have questions about seller concessions with an FHA loan here in Arizona? Be sure to speak with one of our loan officers who can help you understand what seller concessions are and aren’t.

FHA Streamline Refinance Without An Appraisal Required

If you have bought your house in the last few years with an FHA loan, chances are that you can take advantage of lower interest rates by refinancing through the FHA streamline refinance program.

And if you live in Arizona and have bought your house in the last couple of years, chances are that you owe more on the mortgage than your house is currently worth.

Can you still take advantage of lower interest rates and refinance even if you owe more on your mortgage than your house is now worth?

You can with the FHA streamline without appraisal refinance program.

Last fall, HUD changed the guidelines on the FHA streamline no appraisal program and now if you are going to do an FHA streamline without appraisal, you can’t finance your closing costs into the loan. I thought this meant that FHA streamlines were pretty much dead — until interest rates went lower than I thought possible.

These changes now mean that anyone who wants to do a FHA streamline is going to be bringing in money to close your FHA loan under the FHA streamline no appraisal program — unless — interest rates drop significantly.

And interest rates have dropped to historic low levels.

Which means that you can now do a FHA streamline refinance without an appraisal and have it still make sense financially.

So if you are in the situation where you want to lower your interest rate and monthly payment but are worried that you can’t refinance because you owe more on your mortgage than your home is worth – don’t worry.

Just ask your loan officer about the FHA streamline without appraisal program.

More information about the Arizona FHA streamline refinance program

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.