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The Difference Between FHA and FHA 203k Loans

[ 0 ] April 30, 2013 |
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FHA 203k Loans

The Federal Housing Authority (FHA) has been in the news a lot over the last few years thanks to their increase in mortgage activity. More people are flocking to the FHA type of mortgage in order to purchase a home or refinance an existing loan down to a better interest rate. There has also been quite a bit of buzz about the FHA 203k. Besides the little numbers 203, what is the difference between these two loans?

FHA: Purchase or Refinance AS IS

The original intent of the FHA mortgage, and the continued focus of the program, is to offer home ownership to individuals without the burden of a large down payment. While conforming loans may require a down payment equal to 5% to 20% of the homes purchase price, the FHA requirement is much lower. As of this writing, FHA asks that buyers pay 3.5% of the purchase price as a down payment from their own funds. As an added benefit, buyers can use gift money from relatives as the down payment.

For people that wish to refinance an existing home loan, the FHA will allow people to borrow up to 96.5% of the home’s appraised value. In both instances the home in question is either being purchased or refinanced as it sits with no major improvements or repairs.

FHA 203(k): Purchase or Refinance PLUS REPAIRS & IMPROVEMENTS

The FHA 203k program will allow people to buy a home at a contracted price and also borrow additional funds to make needed repairs or reasonable improvements to the property. Repairs could come in a wide range of areas such as electrical, plumbing, heating and cooling, roof repair, flooring repair, or insulation replacement. Reasonable improvements can include items such as energy saving windows and doors, modern appliances or simple cosmetic updates such as new carpeting and new paint.

The FHA 203k loan will require a contractor to inspect the home prior to purchase and make an estimated list of the items needing repair and develop a price for the work. An appraiser will then use the estimate from the contractor to develop the appraised value after the repairs are completed.

The loan will be handled in two parts. First, the funds necessary to buy the home will be provided to the seller at closing. The additional funds needed for the repairs and improvements will be placed in to escrow. When the contractor finishes the work, and the appraiser makes a subsequent inspection to verify the work, the money will be released to the contractor.

For additional information, visit our FHA 203k Loans page.

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Category: FHA Loans

About Inlanta Staff:

Inlanta Mortgage opened for business in 1993 in Waukesha, Wisconsin. With our superior service and wide variety of available loans we have grown to 27 partner branches located in the following states: Arizona, Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, North Dakota and Wisconsin.

As a mortgage bank we can provide loans using our own funds or we can use the loans and guidelines provided by one of our many lenders. We offer tremendous support to all of our partners through outstanding marketing, underwriting, compliance auditing, loan processing, technology, accounting, and legal advising.

Our wide array of lender relationships provides our customers with the best loan programs currently available today, whether it is conventional lending, FHA purchase loans, or VA loans.

Inlanta Mortgage is an active member of the Mortgage Bankers Association, upholding high levels of ethics and honesty in all transactions. As a member of Lenders One Inlanta Mortgage is a part of the biggest cooperative of mortgage bankers within the United States. We are proud of their A+ rating with the local Better Business Bureau.

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