Home Affordability through the FHA 203(k) Program

Did you know the Federal Housing Administration (FHA) insures more than one loan program? The most common FHA loan program is known as 203(b) and is suitable for move-in-ready homes. However, the FHA 203(k) loan program is growing in popularity and necessity. Occasionally referred to as a purchase-and-rehab loan, the 203(k) loan enables homebuyers to finance up to $35,000 in rehabilitation costs into their mortgage. These types of loans are helpful for community revitalization and improving home affordability.

In some cases, the home a buyer can afford may need immediate repairs before move-in. FHA 203(k) loans extend the opportunity of homeownership to borrowers who would otherwise be priced out of the current market. Let’s say a borrower has budgeted to afford a monthly mortgage payment under $1,200. The borrower begins looking for homes in the $190,000 to $210,000 range in Greater Houston.  The borrower might discover that many homes that meet their size and location criteria need rehabilitation. The borrower might fare better by purchasing a home at $185,000 using the FHA 203(k) program and wrapping in $25,000 for repairs and rehabilitation. Another benefit to borrowers with more restrictive budgets is the possibility of a lower downpayment and lower closing costs with FHA loan programs.

Ultimately, it is imperative for the borrower, agent, and loan officer to have frequent and transparent communication to ensure the best course of action. To learn more about the FHA 203(k) loan program and homes that might meet your needs, contact me directly!