ShareThisFHA 203k Financing Program: A Good Option!
The FHA 203k Financing Program is a good option for anyone looking to purchase a home that needs updating or repairs that the seller is unable or unwilling to fix due to the property being a short sale, foreclosure or estate sales. A 203k loan can help buyers finance both minor and major repairs and improvements. It can also help buyers compete with investors when bidding for short sales and foreclosures.
In the past 203k loans were tedious and difficult. I use to avoid them as much as possible but I would still end up assisting about 2- 3 clients a year to navigate through the process. Most lenders during those days did not specialize in 203k financing so many were learning with each transaction. We never went to settlement on time because a step was always missed and we had to back track. Today I can gladly tell you that is no longer the case. Most lenders who offer FHA 203k financing have a 203k department and loan officers that specialize in the process. I have 2 clients this year who have used FHA 203k financing and both went smooth.
Streamline vs Traditional
Buyers today have the option of doing a streamline or the traditional 203k. A streamline 203k is good for a buyer who is financing $35,000 or less in repairs. The buyer receives half the repair money at settlement. If you go over the $35,000 for repairs you must use the traditional 203k financing. I recommended that my clients who were first-time home buyers to use the traditional 203k instead of the streamline option even though their repair amount was less than $35,000 for several reasons. My first thought was that I wanted my clients to have a good experience and lessen their risk and potential loss of money. The traditional 203k requires that the contractor the buyer has chosen do the work before he gets paid. If the contractor puts in a new kitchen for the buyer a FHA Fee Inspector must come to the property look at the work and sign off on the repairs with the buyers permission before the contractor will get paid. This insures that the contractors does the work correctly the first time or make any necessary modification before receiving his/her money. When a buyer does the streamline 203k and receives half the money up front most of the time they will give it to the contractor and if the buyer is not satisfied with the work the contractor has been paid some or most of the money. Most contractors will not start the work without receiving money in advance. I have found several contractors that specialize in traditional 203k financing and are willing to put up their money and get paid when their work is completed. And my clients are having a wonderful experience. In the past most 203k’s did not work because of issues with contractors. Things have changed for the better and I now recommend FHA 203k financing to my clients its a Good Option!
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