New England Properties

Frequently Asked Question: Is there a maximum amount you can borrow on the FHA 203k Rehab loan?

Frequently Asked Question: Is there a maximum amount you can borrow on the FHA 203k Rehab loan?

Q: If the maximum loan for FHA is $271,000, then can I buy a house for $171,000 and 'borrow' the additional $100,000 to rehab the house? (yes, I know you don't want to over-improve a house and price it out of the neighborhood.... lets just assume that the improvements are reasonable value-wise. I am inquiring about the details of the FHA 203k Rehab loan.)

A: In short, the answer is yes, there is a limit. The limit is the maximum FHA loan amount for the county in which the house is located. The house of course must appraise for the value after the renovations are completed, and you must be able to afford the mortgage taking into account your income and monthly debt obligations.

As you expect to make more than $35,000 in repairs / renovations / upgrades, you must go through the full FHA 203(k) Rehabilitation Loan program. That means you must hire an FHA 203(k) consultant to document the repairs to be done along with the estimate of costs of repairs. That list must be provided to the appraiser BEFORE the house is appraised. The appraiser will provide a "before" and "after" value of the house. The "before" appraisal is the appraiser's opinion of value before repairs are done. The "after" value is the appraiser's opinion of value after the repairs are completed.

 

 

Lew Corcoran
Licensed Real Estate Professional

Best Choice Real Estate Services
133 Turnpike St, South Easton, MA 02375
Phone Toll-Free: (800) 984-3341

Serving Easton MA and the Surrounding Area

 

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4 commentsLew Corcoran • January 26 2010 05:30AM

Frequently Asked Question: Is there a maximum amount you can borrow on the FHA 203k Rehab loan?

Frequently Asked Question: Is there a maximum amount you can borrow on the FHA 203k Rehab loan?

Q: If the maximum loan for FHA is $271,000, then can I buy a house for $171,000 and 'borrow' the additional $100,000 to rehab the house? (yes, I know you don't want to over-improve a house and price it out of the neighborhood.... lets just assume that the improvements are reasonable value-wise. I am inquiring about the details of the FHA 203k Rehab loan.)

A: In short, the answer is yes, there is a limit. The only limit is the maximum FHA loan amount for the county in which the house is located. The house of course must appraise for the value after the renovations are completed.

As you expect to make more than $35,000 in repairs / renovations / upgrades, you must go through the full FHA 203(k) Rehabilitation Loan program. That means you must hire an FHA 203(k) consultant to document the repairs to be done along with the estimate of costs of repairs. That list must be provided to the appraiser BEFORE the house is appraised. The appraiser will provide a "before" and "after" value of the house. The "before" appraisal is the opinion of value before repairs are done. The "after" value is the opinion of value after the repair are completed.

 

 

Lew Corcoran
Licensed Real Estate Professional

Best Choice Real Estate Services
133 Turnpike St, South Easton, MA 02375
Phone Toll-Free: (800) 984-3341

Serving Easton MA and the Surrounding Area

 

Search the MLS for:

Homes for Sale | Homes for Rent

Short Sales (Pre-Foreclosures)

Government and Bank Foreclosed Homes for Sale

Learn how to Avoid Foreclosure with Home Rescue Plans

Get the latest Easton MA Real Estate Market News

0 commentsLew Corcoran • January 21 2010 01:08PM

Frequently Asked Question: First Time Home-buyer FHA 203(k) Rehabilitation Loan Questions

Frequently Asked Question: First Time Home-buyer FHA 203(k) Rehabilitation Loan Questions

Q: I am currently in the process of purchasing my first home. I have found a foreclosure listed at $39,999. The loan estimate (not GFE) shows closing costs at $4,000 including $20,000 in rehabilitation funds. To me, that seems very high such a small loan. A few of the questions I have:

  • Is there a 1% cap on origination fee? Is there a 1.5% added fee for the rehab loan?
  • Can UFMIP be financed?
  • Typical length of time these loans take to process

This seems like a great loan for me, and quite frankly one of my few options for getting into my first home. I just want to make sure the bank (who also owns the property) isn't screwing me over too much.

Q: As with any other loan product, the fees (and rate) are negotiable. Basically, the lower the fees, the higher the rate. And the higher the fees, the lower the rate. In your case, it's difficult to determine whether or not $4,000 in fees is too much without having a breakdown in those fees. For example, that $4,000 in closing costs might also include the Upfront Mortgage Insurance Premium (UFMIP) as well as escrows for property taxes and insurance.

FHA 203(k) Rehabilitation loans have extra costs not normally found in other loan products. Typically, the underwriting fee is higher, and there may be an inspection fee for the inspection and verification of the completion of repairs before the funds are released to the contractor.

As for all FHA loans, the 1% origination fee cap has been removed.

As for the UFMIP, yes it can be financed into the loan.

As for the typical length of time to process these loans, for FHA 203(k) Streamline Rehabilitation loans, expect 30 - 45 days. For the more involved FHA 203(k) Rehabilitation loans, expect 45 - 60 days.

 

 

Lew Corcoran
Licensed Real Estate Professional

Best Choice Real Estate Services
133 Turnpike St, South Easton, MA 02375
Phone Toll-Free: (800) 984-3341

Serving Easton MA and the Surrounding Area

 

Search the MLS for:

Homes for Sale | Homes for Rent

Short Sales (Pre-Foreclosures)

Government and Bank Foreclosed Homes for Sale

Learn how to Avoid Foreclosure with Home Rescue Plans

Get the latest Easton MA Real Estate Market News

0 commentsLew Corcoran • January 21 2010 01:04PM