FHA 203k Contractor
If you’re looking to purchase a home, you may be familiar with the term “FHA loan.” An FHA loan or mortgage is a mortgage that’s insured by the Federal Housing Administration, which allows borrowers to put down as little as 3.5% of the purchase price. But what if you’re looking to buy a fixer-upper? The FHA has a program for that too—it’s called the FHA 203k loan. We are your go-to FHA 203K Contractor in Willingboro, NJ and the surrounding area.
Would you like to find an FHA 203k contractor? look know further, Contact our team of professionals to get the process started.
What is an FHA 203k Loan?
An FHA loan is a type of home loan that allows you to finance the cost of repairs and improvements to your mortgage. Rather than taking out a separate loan for repairs, you can roll the cost of the work into your mortgage and pay it off over time. There are two types of 203k loans —a Standard 203k and a Limited 203k—and they each have different features and eligibility requirements.
A Standard 203k loan is intended for major rehabilitation work or for properties that require significant structural repairs. If you’re planning on making major renovations like adding an addition or gutting an entire floor, then this is the type of FHA loan mortgage for you. In order to qualify, the value of your home must increase by at least $5,000 after the renovations are complete.
A Limited 203K loan is best suited for less extensive repairs like painting, replacing windows or doors, repairing leaks, or fixing cosmetic damage. If you’re not planning on making any major changes to your home, then this might be the right FHA 203k mortgage in Cherry Hill, NJ for you. There is no minimum repair cost required in order to qualify—you could just need a new coat of paint!
The amount you can borrow with an FHA 203k loan depends on the value of your home after it has been repaired or improved. The maximum FHA loan cost you can borrow is 110% of the “after-improved” value of your home (the value of your home after the work has been completed). This means that if your home is worth $250,000 as-is, and will be worth $400,000 once it’s been renovated, you can borrow up to $440,000 with an FHA loan in Willingboro, NJ.
FHA 203K Contractor
HUD/FHA does not certify, approve or endorse contractors. There is no such thing as an FHA approved or FHA certified contractor. The borrow may hire whomever they chose and the lender will determine if that selected contractor is acceptable to be used for the 203K loan. Lenders verify, license / registration, insurance, references, education, and experiences of contractors before allowing anyone to work on a home. TruHomes is your FHA 203k Contractor with years of experience working with many lenders in the NJ, PA, & DE area.
How Does It Work?
If you’re interested in applying for an FHA 203k loan in Cherry Hill, NJ, first get in touch with one of our recommended FHA-approved lenders who offers them. Once you’ve been pre-approved for a mortgage, you’ll need to find a property that meets certain HUD standards—your real estate agent will be able to help with this step! Once found and purchased, any repair work that needs to be done will need to be completed within six months. After the work has been completed and inspected by HUD (Housing & Urban Development), any unused funds will be released so those final payments can be made, and then you’ll officially own your newly-renovated home. We are the best FHA 203k Contractor in NJ, PA and DE.
If you are interested in learning more about the FHA 203(k) loan program, TruHomes can help. We would be happy to answer any questions you may have and help you get started on your home remodeling project.
An FHA 203k mortgage is a loan program that allows homebuyers to finance the cost of repairs and renovations into their mortgage.
To qualify for an FHA 203k mortgage, borrowers must meet the usual FHA requirements, such as a minimum credit score of 640, and be able to make a down payment of at least 3.5%.
The amount you can borrow with an FHA 203k mortgage depends on the value of the home, the amount of repairs or renovations needed, and your credit score.
The main benefit of an FHA 203k mortgage is that it allows homebuyers to finance the cost of repairs and renovations into their mortgage. This can be helpful for homebuyers who may not have enough money saved up to cover the cost of repairs or renovations outright.
The contractors are paid in a series of draws by the borrower’s lender through escrowed funds. At closing, the lender places the rehab/improvement funds into an escrow account.
FHA 203k Limited
Contractors receive maximum two (2) payments. After closing on the home, contractors may receive a portion of the job cost (maximum 50%) as a pre-construction payment, subject to lender approval but may take a few weeks to arrive. Therefore, contractors must be financially capable of affording all the start-up costs and a portion of the ongoing expenses with the 203k project (ample credit lines with suppliers and subs and/or sufficient capital/reserves is required). Once all the work is complete, the contractors can request final payment of the remaining portion of the job cost according to the proposal that was submitted and approved by the borrower and the lender.
FHA 203k Standard
Contractors receive a maximum of four (4) draws plus a final. After closing on the loan, there is no upfront money paid to contractors to offset the start-up costs. Therefore, contractors must be financially capable of affording all the start-up costs and a portion of ongoing expenses with the 203k project (sufficient credit lines with suppliers and subs and/or sufficient capital/reserves is required). Contractors receive payment after stages of work are completed and inspected. For each draw request on the 203k Standard, an inspection is required.