With the current doom and gloom that is all around, most especially plaguing the housing and mortgage market, getting a new loan or mortgage is a lot more difficult. One of the most difficult loans to obtain nowadays is a home improvement and construction loan. But borrowers need not worry because the currently popular FHA loan has a FHA construction loan that you could get for your home improvement requirements.
They call this FHA construction loan as the 203(k) streamline program. This loan can be used to buy a fully furnished or refurbished house or make certain major repairs and upgrades to their home. But it is not limited to that because it can even be used to refinance a current mortgage.
One good thing about this loan is that it is not re-qualified because it has only one underwritten time which is upfront. There is also no minimum amount required for home improvement, repair or upgrade but they have set a maximum limit which averages for most states at around $35,000.
The 203(k) streamline program gives you two good options for interests: fixed and adjustable rates. You don’t need even to worry if it would be too high because it would also just be the same like obtaining any standard FHA home loan.
On purchase of a fully furnished or refurbished house, the evaluation is finalized as “subject to” which means that it would be after the repairs or improvements are done. As for refinancing mortgages, two appraisals are needed. The first one would show what would be the current value of the property and the second one would indicate the value after all the payments have been done (including the interest payments).
But not all properties are eligible for a FHA construction loan most especially on refinancing mortgages. HUD REO properties, condos and manufactured homes are allowed including one to four unit houses. One criterion for eligibility is that the house should be 100% complete.
As for eligibility of FHA 203K on home improvement or upgrade works, one important requirement is that it would be finished within three months after the loan had been approved. Private lenders often require the borrower to have the repair or upgrade to be done by a licensed contractor.
Although they may not licensed but the borrower should be able to prove the expertise of the contractor on the work that needs to be done by submitting a resume that contains at least two references who would certify the credibility of the contractor.
It could also be the borrower itself who can do the work but just like with the contractor, the borrower needs to prove his expertise and experience on getting the job done. But before that, they need to submit the cost estimates including labor and the materials needed. This is important just in case the borrower failed to finish the work satisfactorily and a need to hire a contractor is imminent.
Getting a FHA construction loan would really be a big help to you in these days of turmoil.