FHA vs. 203k Loan: What does the FHA have to do with Renovation Loans?
FHA vs. 203k Loan: What does the FHA have to do with Renovation Loans?
The short answer to the question, “What does the FHA have to do with Renovation Loans?” is, “everything”. If the Federal Housing Administration or FHA was a tree, the 203k Loan would be one of its branches. Simply put, the FHA is a mortgage insurer. The administration was created amidst the high number of foreclosures and defaults during the Great Depression. They served to encourage banks through incentives to give home loans to low-medium income families, first time homebuyers or those with a low credit score. The result was a stimulated economy and more American homeowners. Today we see the FHA loan products acting in the same way; many first-time homebuyers find themselves interested in the FHA loan because of the low down payment requirement as well as the reasons just mentioned.
This administration was the creator of the 203k Loan. The idea behind the creation of this product was to give first time homebuyers that ability to purchase and repair a damaged home. You see, to qualify for a standard FHA mortgage, the property must meet minimum property standards prior to closing on the loan; however, with the FHA 203k, the minimum property standards do not need to be met at closing. This loan program has certainly benefited more than first time homebuyers throughout its existence, which began in the 1960’s. The benefits of the FHA 203k Loan extend past the individuals purchasing the home; this loan program can also contribute to neighborhood revitalization. The permissive qualifications for the loan product provide more individuals an opportunity to qualify and the very essence of the loan encourages them to repair a home, benefiting the community that surrounds them.
While there is a focus on first time homebuyers or individuals who may not qualify for other home loans, the FHA 203k extends its reach to many home buyers/owners with a variety of backgrounds. This loan can be used to simply change out your kitchen cabinets, through a refinance. Or it could be used to add on a second living area. Or if you are shopping for a home but can’t find one you like, you can use the 203k Loan to purchase a home and update it to your tastes! Our 203k Loan specialists would love to speak with you about the amazing things this loan program can do for you and your family, call us at 1-888-914-2276 or visit us at www.smcapproved.com
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