FHA 203K Mortgages – How Are They Different from other Mortgages?

by Keith Landis on February 23, 2011

An FHA 203K mortgage is the HUD’s primary program for the rehabilitation and repair of single family properties. HUD provides this 203K program as an important tool for community and neighborhood revitalization and for expanding homeownership opportunities.

FHA 203K Mortgages – How Are They Different from other Mortgages?
Most mortgages only provide permanent financing. This means that the lender will not close and fund the loan unless the condition and value of the property provides adequate loan security. When rehabilitation is involved, this means that a lender will require the improvements to be finished before any mortgage can be made.

When a homebuyer is looking to purchase a homes in need of repair or rehabilitation, the homebuyer usually has to obtain financing first to purchase the home; then secure additional financing to do the rehabilitation; and finally a permanent mortgage when the work is completed to pay off the two mortgaes that were taken out to purchase and rehab the home. Often the initial financing (the acquisition and construction loans) comes with unattractive terms such as high interest rates and short amortization periods. The FHA 203K program is designed to make this entire process quicker, easier and cheaper for the homebuyer. Instead of the headaches involved with having to obtain three difereent rounds of financing, the FHA 203K program allows the homeowner to get just one mortgage loan with a low long term fixed rate to finance both the purchase and the rehabilitation of the property.

The FHA 203K is an excellent way to get the cash you need to rehabilitate your current property or a property that you are interested in purchasing.

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