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FHA 203K rehab loan product available
Is the FHA 203K rehab loan product available only for those looking to living in a house, or is it also available for those looking into investment properties?
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1 Reply
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Do note however, that the FHA 203(k) rehab loan is primarily directed to owner-occupants rather than investment properties. Following are the main issues :
Primary Residence Requirement
- FHA 203(k) loan is meant specifically for an owner occupant who buys the property and lives in it.
- You have to take occupancy of the house within sixty days of closing in order to keep an owner equity status.
- You’ve got to keep that for a period of 12 months or more.
Exceptions for Multi-Unit Properties
- In case of multi-unit properties, where there are 2-4 units, you can occupy one of the units and rent the remaining ones out.
- This gives a degree of rental property while satisfying owner-occupancy provision.
Not for Pure Investment Properties:
- The loan is not applied to the properties for which the sole purpose is to rent or flip.
Limited 203(k) Option:
- There is a much simplified procedure.
- FHA 203k Streamline loans is meant for moderate level restoration in primary residence.
- But this still suggests the owner would occupy the property.
Alternatives for Investors
If investors are planning to purchase and do some renovations on properties might want to look at the conventional renovation loans or hard money loans.
Future Conversion
After the requisite years the house occupants will have lived there, they may choose to convert the house to a rental but that is not what the purpose of the loan was.
Benefits for Owner-Occupants:
- A lower percentage of the property’s value must be given as deposit (down payment) requirement.
- A more relaxed approach towards the owner-occupants’ credit history and debt –to-income (DTI) score as compared to the standard mortgages.
- The power to combine both the acquisition and rehabilitation of the property in one mortgage.
Restrictions:
- They do not support lavish details.
- A span of at most six months is allowed following the closing date within which improvements should commence.
- Where the FHA 203 k loan is helpful to home owners intending to remodel and improve their dwelling which is their primary residence, the same cannot be said for investors regular financing for their projects.
- On the off chance that you are considering this loan, it would silence the valuable customers and buyers in dispute legally since they would have to pledge their past assets.