Real Estates Best Kept Secret: The FHA 203k Program Can Change Your Life and Financial Future!

Tami Bonell President U. Dream Homes Do Come True! Has your dream of owning a home become just that — a Dream? As an FHA loan, it's easier to qualify and requires as little as 3. Follow the link at the top left to "Find Your k Specialist". We'll connect you with a member of our national network of specially-trained mortgage professionals to find out how much home you can afford.

Amazing Home Ownership Opportunities. In many areas of the country, homes offered through foreclosure or short sales are available at substantially reduced prices. However, many of these homes have been poorly maintained or damaged by previous occupants. You will need to find a contractor who is familiar with the K reno loan. Truly trust your contractor and get multiple recommendations. I realize this is difficult because it's hard to get contractors to jump through the additional K hoops and agree to do the project.

Take your time to find the right contractors and don't let the closing pressure affect your choices. I wish I had shopped around more for floor contractors - but I went with the first one because I was on a deadline to get the paperwork in. Make sure that they understand that it may be a few months before they get the final payment.

Our contractor was not familiar with the loan and was extremely frustrated when our loan did not close on time, pushing the date of the project. Leave extra time and budget to live in your current home. The contractor estimated 3 weeks to complete the work. We ended up having to move out of our place and sleep on the in-law's living room floor for a month and commute an hour to work each way after going to check on the house after work every day.

Save up your vacation time. You WILL need to be on site to approve changes and make decisions, and to move things along. I used up some vacation time to pack things at the old place, and regretted it when I ran out of vacation time and had to work late to make up for time running to the hardware store, etc.

You will need to finish renovations within 6 months You are now on a strict timeline. That includes the time you're waiting for the first check after closing - so work that into your timeline. You should have all materials ordered and ready to go. You should have your plans agreed upon by your contractor and any permits applied for. Your significant other and you will need to agree on styles ahead of time. You will need to set aside a fund for over budget items. Make sure that you have additional funds in reserve for additional expenses. There is always something that comes with renos.

You will go over budget and your k budget does not have much wiggle room built in. We didn't realize there was water damage in the kitchen wall, along with no insulation. That required a change request for more drywall work, insulation and more money. You will need to manage your project very closely. Type out a comprehensive project plan in Excel and get the contractors to sign it.

Part II: Types of 203(k) loans

Keep on top of it each week. Insist on formal change requests for any changes. This will protect both the contractor and yourself from misunderstandings and additional costs. We started out organized and then tapered off - which hurt us later on when the contractor hit us with additional charges that we had assumed were included. You have a lot at stake and no room for mistakes. Get all the contractors together to agree on a schedule.

The contractor agreed to having the flooring contractor get started on the damaged hardwood floors. When the flooring guys showed up, the contractor threw a fit and yelled at them to leave. We not only lost time, but also the goodwill of the flooring guys. You will need to employ a licensed contractor for much of the work. The mortgagor must use one or more contractors to complete the repairs. You will need to be organized. Shop around for deals on supplies.

I bought a number of items online. Make sure to keep receipts in a safe and easily accessible place - you'll need those to be reimbursed. As well, keep a running tally of all costs in an Excel sheet in Google docs. That made it easier for me to update from work and from home. I bought a little accordian wallet to keep all my house-related receipts to ensure that I kept everything safe.

You may need a storage space near your new house. I thought that we could move all our stuff into the garage while the contractor completed the house. Unfortunately, the contractor needed the space to store additional materials and tools. Be prepared to pay extra money for PMI. This extra insurance policy reimburses the mainly mortgage company should you default.

As of today, you will need to pay a fee of 1. You will need to set aside many of your hobbies and outside interests for a few months. The renovation process, time to oversee the project, projects that we personally had to complete within the 6 months and the overall stress and lack of money resulted in a lack of social life for a few months. Friends were invited to bbq in the yard and sit on folding chairs, while chugging cheap red wine. They were welcomed to pick up paint brushes or help demo tile. Our hobbies fell by the wayside, which was fine because we fell into bed exhausted each evening.

Since we were also living in one room in the house during most of the renovation, the stress and coordination needed to ensure a presentable outfit for outings was not always possible. Drywall dust was now an accessory. Your relationships will be severely tested during this time. The stress of adhering to a strict list of renovations you submitted to the underwriter and mortgage broker makes this renovation even more stressful than a regular renovation.

According to Eamon McKeon , a New York-based renovation loan specialist, interest rates on a k loan are typically 0. They also require you to pay mortgage insurance. There is an upfront premium equal to 1. And there is an annual premium, paid monthly, that ranges from 0. Additionally, McKeon cautioned that unlike conventional loans, this mortgage insurance premium is applied for the entire life of the loan unless you put at least 10 percent down.

The only way to get rid of it is to refinance. A k loan allows you to finance a wide range of renovations, all the way from small improvements like kitchen appliance upgrades to major projects like completely tearing down and rebuilding the house. Department of Housing and Urban Development provides a list of eligible improvements:. The big stipulation is the work has to be done by a contractor. You are not allowed to do any of the work yourself though there is an exception to this rule for people who have the skills to do it.

According to McKeon, this is the most challenging part of successfully executing a k loan.

Understanding the FHA 203k Loan

He said the vast majority of the projects he sees go south have contractor-related issues, from underestimating the bid, to being unresponsive, to not having the correct licenses. On the flip side, one of the benefits is that the bank helps you manage costs. They put the money needed for the renovations into an escrow account and only release it to the contractor as improvements are made and inspected. Capalad suggested using sites like Yelp and HomeAdvisor , as well as references from friends, to find a contractor. She said you should interview at least four to five people, get bids from each, and not necessarily jump at the cheapest bid.

A k loan is available to anyone who meets the eligibility requirements discussed below and is looking to renovate a home.

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But there is no requirement that you have to be a first-time homebuyer. The program can also be used to finance either the purchase of a home in need of renovation or to refinance an existing mortgage in order to update your current home. Qualifying for a k loan is much like qualifying for a regular FHA mortgage loan, but with slightly stricter credit requirements. A k loan can be used for any single-family home that was built at least one year ago and has anywhere from one to four units. You can use the loan to increase a single-unit property into a multi-unit property, up to the four-unit limit, and you can also use it to turn a multi-unit property into a single-unit property.

Within those limits, a wide variety of properties could qualify. Everything is based on the renovations to be done and the future condition of the property. A streamline k loan, or limited k loan , is a version of the k loan that can be used for smaller renovations. There is no minimum repair cost. In return, you get an easier application process. While a standard k loan requires you to hire a HUD-approved k consultant to help manage the renovation process, a streamline k does not.

However, there are limits to the kind of work you can have done with a streamline k loan. So when does a streamline k loan make sense over a standard k loan? Here are some of the alternatives. The Fannie Mae HomeStyle Renovation Mortgage is a conventional conforming mortgage that, like the k loan, is specifically designed to finance renovations. The biggest drawback is that it requires a 5 percent down payment as opposed to 3.

That can potentially require you to bring a few thousand dollars more in cash to the table. The biggest reason is that your monthly private mortgage insurance PMI is typically less, and it automatically drops off once your loan-to-value ratio reaches 78 percent, as opposed to a k loan where the PMI generally lasts for the life of the loan.

The advantages over a k loan would generally be a potentially lower interest rate and fewer restrictions around what improvements are made and who makes them. The big downside is that your loan is limited to your current equity. If you purchased your home relatively recently, or if your home has decreased in value, you may not have enough equity to finance a sizable improvement.

And if you are looking to purchase and renovate a new home, the k loan is likely the better option. Like k loans, Title I property improvement loans are backed by the federal government. If you have the savings to afford the renovations yourself, or if you can wait until you do have the savings, you could save yourself a lot of money by avoiding financing altogether.

For larger projects or those that need to be addressed immediately, financing may be the only way to make it happen. As Capalad found out the hard way, the money you save is often more than made up in sweat equity. At the very least, the k loan expands the realm of possibility. The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear.

MagnifyMoney does not include all financial institutions or all products offered available in the marketplace. Matt Becker is a writer at MagnifyMoney. You can email Matt here. LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple mortgage offers within minutes. Everything is done online and you can be pre-approved without impacting your credit score. LendingTree is not a lender, but their service connects you with up to five offers from mortgage lenders.

(3) Secrets Everyone Needs to Know about using a 203k Loan - Its Easy!

Denny Ceizyk is a year veteran of the mortgage industry. He has worked in all facets of home loans starting in loan processing and ultimately owning and operating a mortgage brokerage company for 18 years. Denny has written and presented to government housing, local media and national media about mortgage financial literacy. He graduated from the University of Arizona with a degree in Media Arts and Business, and recently relocated to New York City where he lives with his wife and daughter.

The past several years house values have increased in many parts of the country. Median incomes in the United States have also risen the past four years in a row. The biggest factor that will drive your interest rate and monthly payment will be your credit history. Buying or refinancing with bad credit can be challenging, but there are ways to overcome those credit issues if you understand how lenders look at all the parts of your loan application when determining your ability to repay a mortgage loan.

Lenders look at the total amount of debt plus your mortgage payment divided by your gross income very seriously to make sure you will be able to repay your mortgage. Many current and aspiring homeowners are surprised to learn that they can get approved for mortgage financing with scores as low as and very little down payment. They are equally as surprised by how much more the monthly payment and closing costs are as a result of their low credit scores. Below is a graph showing the effect of credit scores on interest rates for consumers who received loan offers through the LendingTree marketplace in October The minimum credit score requirements for purchases and refinances are the same.

Lenders look at more than just your credit score when making mortgage loans. There are a number of things that you can provide to compensate for a weak credit history, and many lenders are willing to take a second look at a loan application they initially rejected if you can provide proof of some of these items. Lower debt-to-income ratios and long-term job stability: If you are able to borrow below the maximum debt ratios, and have at least two years in your current job, you will have a better chance of getting approved, even if your credit scores are near the minimums. This might mean you have to buy a little bit less of a home, so keep that in mind if you are starting the house-hunting process knowing you have some credit problems.

Extra reserves and savings: Extra savings, in addition to other retirement savings, can help offset a bad credit history. Having your own down payment versus a gift of down payment assistance: If you can save your own down payment, it will help show you have already made a financial commitment toward the house. Minimizing credit use 60 to 90 days before you apply for a mortgage: Hold off on buying that brand new car, and limit your credit use to small purchases on credit cards for 60 to 90 days before you apply for a mortgage.

There are a variety of credit repair companies that can help you, but it may take three to six months, and there is usually a monthly cost involved. This allows for corrections to your credit card balances that are reflected within five to seven days, instead of the normal 30 to 60 days it may take a credit repair company to correct the information.

As with any financial product, be sure to shop around. They allow for borrowers who have had major credit events like recent foreclosures or bankruptcies to borrow money at much higher rates. There are many different lenders offering a variety of programs to overcome credit challenges. Before you apply, compare mortgage offers online so you can see what your payment will look like based on your current credit score.

Whatever your situation, be sure to explain all the details to your mortgage professional, and be prepared to provide supporting documents. If you can show that you understand what caused the credit issues and provide proof of the other good things going on with your income and assets, a lender may be willing to consider your refinance or purchase mortgage application for approval. Denny Ceizyk is a writer at MagnifyMoney. You can email Denny here. Gordon is a freelance writer, Certified Financial Education Instructor, and founder of Tay Talks Money, a money management blog that helps millennials, free-spirits, and creatives master their money.

Hurricane Michael devastated communities in Florida and southern parts of Georgia in October Since then, federal agencies have committed hundreds of millions of dollars in aid to people affected by the storm. The deadline for individuals and households to apply for Hurricane Michael disaster assistance is Dec. Home insurance covers loss or damage to your home and personal property after events like theft or fire. A home insurance policy may cover accidental injury or death as well.

Home insurance policies typically do not provide coverage for damage caused by floods. Flood insurance is a policy that specifically covers flood-related loss. Flood insurance can be bought through private insurers or the National Flood Insurance Program. Flood insurance comes in two parts — building coverage and contents coverage. Building coverage insures the foundation, electrical, plumbing, air-conditioning, furnaces, some appliances and more. Contents coverage covers personal property like furniture, electronics and other valuables. Florida has many moderate to high-risk flood zones, so many homeowners affected by Hurricane Michael likely have at least the minimum coverage required by law.

The National Flood Insurance Program has several resources available to help you understand how flood insurance works. For areas along the Atlantic and Gulf coasts, a deductible for hurricanes and windstorms may be part of your home insurance policy. A deductible is the amount of money you pay before insurance kicks in and starts paying for damages. The storm deductible is separate from the deductible for other perils like theft, fire, etc. This deductible should not be confused with flood insurance. Unlike flood insurance, the hurricane or windstorm deductible offers protection when rain, snow, sleet, hail, sand or wind causes damage to your exterior or interior.

Flooding is a separate issue.

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• (3) Secrets Everyone Needs to Know about using a k Loan - Its Easy!!

Florida Consumer Helpline Florida residents can call the Florida Department of Financial Services Insurance Consumer Helpline at with insurance-related questions. The state of Florida has quite a bit of information online to help residents recover from Hurricane Michael as well. Georgia residents with insurance questions or complaints about a policy can visit the Office of Insurance and Safety Fire Commissioner website or call the office at Learn more about how flood insurance and disaster relief work in our complete guide.

A loan can help you finance repairs and damages that are not covered by insurance and other resources. SBA disaster loans are available to homeowners, renters and business owners in eligible counties to repair or replace real estate and personal property. For business owners specifically, the Florida Small Business Emergency Loan Program in Florida was established after Hurricane Michael to offer short-term, interest-free loans to business owners waiting for insurance claims or federal assistance.

The deadline to apply for this program is Dec. Business owners can learn more here. FHA Disaster Relief may offer a day moratorium on foreclosure. Learn more about how these options help you after a natural disaster here. You can apply for assistance online at DisasterAssistance. Eastern, seven days a week. Disaster Recovery Centers are available for in-person assistance, as well, if you have questions about your case. Search for the nearest center on the FEMA. The deadline for individuals to apply for disaster assistance is Dec.

You can learn more about disaster assistance in Georgia here. Taylor Gordon is a writer at MagnifyMoney. You can email Taylor here. Crissinda Ponder is a mortgage reporter who joined the MagnifyMoney team in Crissinda graduated from The University of Georgia with a B.

203k Streamline loan for California

Home loans backed by government-sponsored enterprises Fannie Mae and Freddie Mac received another annual increase in their limits for In higher-cost housing markets where median home prices exceed the conforming loan limit for most of the U. There are 47 U.



Conforming loan limits must be adjusted annually to reflect average home price changes. This is a requirement included in the Housing and Economic Recovery Act of On the same day it announced the new loan limits, FHFA also released the HPI for the third quarter of , which showed home prices increased by 6. Home prices increased by 1. New limits for FHA loans are usually announced each year in early December.

Conforming loans are mortgages that conform to the standards set forth by Fannie Mae and Freddie Mac, which include not exceeding the baseline and ceiling limits issued by the FHFA each year. On average, jumbo loans have recently had lower rates than conforming loans, possibly because of their stricter underwriting standards or increased competition since the housing meltdown.

New residential sales data for October was released Wednesday. There were , new homes for sale at the end of October, which represents 7. Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here. Lindsay VanSomeren is a personal finance writer living in Tacoma, WA with a houseful of pets including two cats, a dog, and a husband. She has been a professional dogsled racer, a wildlife researcher, and a participant in the National Spelling Bee. In her spare time she enjoys reading, hiking, homebrewing, and blogging about her personal money journey at www.

But what if you make biweekly payments? In that case, either you or your lender will split your payments in half and submit a payment twice each month. This leads to the quirk in the calendar that lets you get ahead. This extra payment might not seem like much, but over the course of the loan, it has huge effects.

If your lender does this, it may be better to stick with your normal monthly payment plan. If you want to make biweekly payments, you can still do so manually for free by setting aside a portion of your paycheck on your own, paying your normal monthly payment, and then submitting an extra payment once per year. Home equity is the amount of your home that you actually own versus how much you owe your mortgage lender.

One of the biggest benefits of making biweekly mortgage payments is that you build home equity faster. You may not realize it, but when you are in the early years as a mortgage borrower, the vast majority of your mortgage payment goes toward interest — not the principal balance on your loan. And that extra payment will give you a small push toward building equity. There are a lot of advantages to having as much home equity as possible.

Understanding the FHA k Loan & How It Works - MagnifyMoney

If you have enough home equity, you can take out a home equity loan to finance things like home repairs or remodels, for example. Another example where having more home equity can help you is when you sell your house. Many homeowners are surprised how expensive it can be when they go to sell their home, all thanks to closing costs, which can amount to tens of thousands of dollars on top of your original loan.

You might end up actually having to pay to sell your home, and losing your down payment money for your next home to boot.



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• Part I: Understanding the basics of 203(k) loans.
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One of the best ways to guard against this is to build up as much home equity as you can as fast as you can, and making biweekly mortgage payments is a good way to do that. When you make a mortgage payment, the bank actually splits up up the money and divvies it out to various things. During the first few years after you take out your mortgage, most of the money will be going toward interest and very little will be going to reducing the balance of your loan sadly. Over the course of your loan, this can save you a huge amount of money. This fee, which is tacked onto your monthly mortgage payment, protects your lender in case you default on your loan.

If nothing else, biweekly mortgage payments take the stress out of those big payments. Making biweekly payments in this way can save you a ton of stress in addition to all the financial benefits. By default, almost everyone is put on a monthly repayment plan.

Your future self will thank you. Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here. Brittney Laryea is a personal finance writer for MagnifyMoney. Her work covers a range of personal finance topics. Recovering from a major hurricane can be overwhelming. Many families facing large out-of-pocket storm costs may wonder what the first steps are to begin rebuilding. File a claim with your insurance company. File for federal disaster assistance. The first thing you should do is print out a complete copy of the most recent insurance policies you have on your home, said Amy Bach, co-founder and executive director of United Policyholders, a national insurance consumer advocacy organization.

Many homeowners make the mistake of calling the insurance company and getting things started before they know what kind of coverage they have, Bach said. Many adjusters are overworked, especially right after a natural disaster. You can contact the insurance company directly and ask them to email you a complete copy of your policy.

If you worked with an agent, you can try contacting them directly for a copy, too. Once you have a copy of the policy in hand, focus on the declaration page, a summary of the policy and how much coverage you have available. It may also include personal liability protection and coverage for guest medical payments when someone else gets hurt at your home.

Standard homeowners and renters insurance policies do not cover damage from storm surges and other flooding. That requires separate policies, typically purchased from the U.