FHA 203K Loan » Home Buying » Purchase » Refinance | GCA (2024)

FAQs

Can I refinance my home with a 203k loan? ›

An FHA 203(k) loan allows you to buy or refinance a home that needs work and roll the renovation costs into the mortgage. You'll get a loan that covers the purchase or refinance price and the cost of upgrades, letting you pay for the renovations over time as you pay down the mortgage.

Expect to receive a rate about 0.75% to 1.0% higher than for a standard FHA mortgage.

Regardless of which type of 203(k) loan you choose, renovations must be completed no more than 6 months after closing.

Enter the effective Fair Isaac Corporation (FICO) credit score for the borrower in the Minimum Decision Credit Score field (three digits). For a borrower with non-traditional or insufficient credit, enter N/A. Note: The maximum loan-to-value (LTV) factor is 96.5% for a purchase case and 97.75% for a refinance case.

Can an FHA 203k rehab loan can be used to refinance a home that has been gutted and is currently vacant? Hi Jerry, If the plan is to live in the property once it's been rehab then yes that should be fine.

To get a 203(k) loan, you must meet the requirements for a standard FHA loan. Credit score, credit history and down payment. If you're making the minimum 3.5% down payment, you'll need a 580 credit score. If your score is between 500 and 579, you have to put down at least 10%.

FHA requires that you use a minimum of $5,000 toward eligible repairs or improvements and that you complete the repairs within six months after the loan's closing depending on the extent of work to be completed.

Limited 203(k) Mortgage

Homeowners can make minor remodeling and non-structural repairs, improvements, or prepare their home for sale. Homebuyers can make their new home move-in ready by remodeling the kitchen, painting the interior, or purchasing new carpet.

What is the standard contingency fee on a 203k loan? ›

FHA 203k Contingency Reserve

The amount for this reserve is 10% based off of the repair & rehab amount but can go as high as 20% depending on the project and property.

FHA 203(k) loans provide funding to finance both a home's purchase and the cost of repairing it. If you qualify, you can obtain one from an FHA-approved lender. This type of loan is reserved for borrowers who intend to live in the home, not house-flippers or investors.

Yes, you can refinance out of an FHA loan as long as you qualify for a conventional loan with a credit score of 620 or higher and have 5% – 25% equity in your home. If you have 20% equity, you may also be able to remove your mortgage insurance and lower your monthly payment in the process.

An FHA 203(k) loan is for home purchase and home renovation. There are two types: limited and standard. The amount borrowed accounts for both the purchase price of the home and its renovation costs, which include materials and labor. It is intended to help rehabilitate poorer communities and aid lower-income people.

While FHA Simple and FHA Streamline refinances are only available to homeowners with existing FHA loans, both the FHA cash-out refinance and FHA 203(k) refinance options are available to homeowners with all loan types. This means borrowers can refinance a conventional mortgage into an FHA loan.

There's very little downside to a seller accepting an offer with this type of financing. Typically 203K lenders who actively do these types of loans generally have the infrastructure in place to handle rehab loans and have good sales people who know the product(s) and can facilitate the closing for the buyer.