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Prospect Mortgage 203(K) Home Loans

Updated on November 11, 2014

203(K) Home Loan

What is the FHA 203K Loan Program?

The Federal Housing Administration’s (FHA) home rehabilitation program, the FHA 203K, was created to assist homeowners that want to repair their damaged home so that they can live in it as a primary residence.

FHA is a federal government agency that created these types of home loans to entice lenders to fund home sales that may seem too risky. In addition, this loan program has assisted in revitalizing neighborhoods and increased homeownership opportunities.

How Do I Qualify for the 203K Loan?

First, it’s necessary to know that there are two different types of loans contained in this program: regular and streamlined. Regular 203K loans refer to homes that are in need of structural repairs. Streamlined 403K loans are for homes that need non-structural type repairs.

There are particular qualifications for the FHA 203K loan program. The main qualification is that homeowners have to plan on living within the home they wish to repair.

In addition, these types of residencies qualify you for the FHA 203K loan program:

· Single, two, three and four-family dwellings

· Condominiums

· Tear-downs

· Mixed-usage properties

· Homes that have to be moved to accommodate a new foundation

The following repairs qualify, and your lender will assist you in determining which repairs you can undertake:

· New siding

· Attic or basement finishing

· Site grading

· Room or second-story additions

· Remodeling of bathrooms

· Patios and decks

· New appliances

· Roofing and flooring

· Remodeling of kitchens

· Access for disabled persons

· Air conditioning, ventilation and heating

· Energy conservation

· Plumbing

Getting the FHA 203K Loan to Work for you

One of the most critical steps to obtaining an FHA 203K loan is to have a professional and knowledgeable 203K loan specialist assist you through the process.

· Submit your FHA 203K loan request to be connected with a trained 203K loan professional that will determine how much you can afford.

· If needed, you’ll be connected to a REbuildUSA 203K specialist that will assist you in locating a new home and negotiating an offer.

· Once you find a home a home inspector or HUD 203K consultant will conduct a property inspection, which will identify the repairs FHA requires and the home improvements you desire. Based on this information, a write up of work is submitted for contractor bids.

· Next, the contractor will visit the home and review the write up, finalizing pricing for the renovation and updates. This will be submitted to the lender for approval.

· Final work scope, pricing and selections are obtained and sent to your lender, who will then schedule a home appraisal to gauge the value of the property after the renovations are completed.

· Once your lender approves the loan request, the loan will be slated for closing. Then, the requested home improvement funds will be placed in escrow, and your home renovation can begin in earnest.

Although there will be a lot of red tape during document preparation and closing (closings often take 60 to 90 days until completion), the FHA 203K loan program is incredibly valuable to potential homeowners that are unable to afford a finished home. These individuals are willing to purchase a fixer-upper, with the intention of having a fully completed and livable property after renovations are completed.

Expect a higher interest rate due to lending risk, and remember home improvements don’t always guarantee an increase in home value.

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Different Types of Home Mortgage Loans

Buying a home can be a stressful and complicated process for any family. First find a realtor, next find a home you love, then get your financing in place. But what type of mortgage will be the best for you and your family. Understanding your options will help you make an informed selection.

Qualifying For a Mortgage

Gone are the days of exotic mortgage products requiring no money down with cash out at closing. Regardless of the specific type of mortgage that you select, you still need to qualify, so expect to need a down payment of twenty percent, and a good FICO score. It is possible to qualify without these, but it is more difficult, so do what you can to increase your chances of success. Once you have your ducks in a row, reach out to a bank or credit union, and seek a pre-qualification. This will give you a starting point for how much you will be able to borrow, and remove some of the stress from home shopping.

Fixed Or Adjustable Rate

With interest rates at or near historic lows, an adjustable rate mortgage probably doesn’t make much sense. An adjustable rate mortgage inserts uncertainty into your monthly budget. Depending on which type of adjustable rate mortgage you select, your payment could change every year, every five years, or every ten years. Due to the increased risk of these mortgage products, the homeowner receives a lower interest rate than they would if they selected a fixed rate. Fixed rate mortgages stay the same for the duration of the loan.

Conventional of Government

After the credit crunch in 2008, lending requirements in the private mortgage market tightened. In order for homeowners to continue to qualify for loans, FHA loans became more popular. Government loan programs allow potential borrowers to put less down, and have less than perfect credit while still qualifying. An FHA loan is a type of government loan which is insured through the Federal Housing Administration which protects the lender from default. Since government loans have more risk associated with them, borrowers pay mortgage insurance premiums as part of their mortgage payment. If you have good credit and a solid down payment, a conventional loan will probably be best.

Mortgage Term

The most common term lengths for a mortgage are either fifteen or thirty year mortgages. This means that if you make your mortgage payment on time each month and do not pay any extra, you will pay your mortgage off in fifteen or thirty years. Keep in mind that with fixed rate mortgages, the longer the term, the lower the payment. A longer term also means that you will pay more in interest over the life of the loan.

Regardless of the mortgage loan that you select, be certain that you have properly budgeted for your housing payment. Costs to be taken into account should include any potential changes in your rate, as well as taxes, insurance, and utilities. One of the top contributors to the housing collapse was that too many homeowners signed on to mortgages that they ultimately could not afford. When it comes to your home, err on the side of caution.

Prospect Mortgage "Dream House" 203(K) Home Remodel Loan

Prospect Mortgage "Dream House" TV Spot featuring the "Dream Remodel Loan"

HARP Loans

Disclosure

Equal Housing Lender. Prospect Mortgage is located at 15301 Ventura Blvd., Suite D300, Sherman Oaks, CA 91403. Prospect Mortgage, LLC (NMLS Identifier #3296,) is a Delaware limited liability company licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act and operates with the following licenses: AK Mortgage Lender/Broker License #AK3296; AZ Mortgage Banker License #BK0903027; CO licensing regulated by the Division of Real Estate; Georgia Residential Mortgage Licensee #16984; Illinois Residential Mortgage Licensee #MB.0006424; Kansas licensed mortgage company; MA Mortgage Lender/Broker License #MC3296; MS Licensed Mortgage Co.; MT Mortgage Lender Licensee #3296; Licensed by the NH Banking Dept.; Licensed Banker-NJ Dept. of Banking and Insurance #9932414; NV Division of Mortgage Lending Mortgage Banker #1173 and Mortgage Broker #3095;Operates as Prospect Lending, LLC in NY located at 711 Westchester Avenue, Suite 304, White Plains, NY 10604 (Licensed Mortgage Banker - NYS Dept of Financial Services); OR Mortgage Lender Licensee #ML-2006; PA Dept. of Banking license #22122; RI Licensed Lender #20021343LL, Loan Broker #20041643LB; Washington Consumer Loan Company License - CL-3296. This is not an offer for extension of credit or a commitment to lend. Loans are currently being closed and committed at the expressed rates, however these rates may change or may not be available at the time of your loan lock-in, commitment or closing. All loans must satisfy company underwriting guidelines. Interest rates and APRs are based on recent market rates, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value ratio, credit score and other variables. Call for details. Terms and conditions apply. Additional loan programs may be available. This is not an offer to enter into a rate lock agreement under MN law, or any other applicable law. HomePath® is a registered trademark of Fannie Mae. Disclosure last updated September 4, 2013

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