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FHA 203(k) and Streamlined 203(k) Loans

The FHA offers a home loan program known as the 203(k), which the FHA/HUD official site describes as a home loan guaranty from the FHA for the purpose of helping “homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.”

The 203(k) program “fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment.”

The FHA 203(k) option offers an alternative to this, featuring a single mortgage at a fixed or adjustable rate, “that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.”

But there is also another option for borrowers who want to do rehab work with an FHA guaranteed loan but don’t want to commit to a much larger project.

According to the FHA, “For less extensive repairs/improvements, see Streamlined 203(k). For housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD’s Title I Home Improvement Loan program.”

As you can see there are several options available to a home owner that could help. Whether you’re recovering from storm damage or are just interested in doing so home improvements, the FHA 203(k) loan program could be an excellent way to get started.

Borrowers are eligible to use 203(k) funds to do any of the following, as described by the FHA official 203(k) information page:

* structural alterations and reconstruction
* modernization and improvements to the home’s function
* elimination of health and safety hazards
* changes that improve appearance and eliminate obsolescence
* reconditioning or replacing plumbing; installing a well and/or septic system
* adding or replacing roofing, gutters, and downspouts
* adding or replacing floors and/or floor treatments
* major landscape work and site improvements
* enhancing accessibility for a disabled person
* making energy conservation improvements

Do you have questions about FHA loans? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

November 9, 2012

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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