Over the decades, the home loan programs of the Federal Housing Administration (FHA or Federal Housing Administration) They have helped millions of people buy their homes. But nevertheless, FHA does not make mortgage loans. Rather, the FHA insures or endorses some mortgage products already made by approved lenders., including the agency’s 203b and 203k loans.
Among the main differences between FHA 203b and 203k loans, we can point out that one is intended for homes that need major repairs, while the other is not.
FHA 203b Loans
The FHA 203b is the most common FHA-insured mortgage loan product..
If you’ve found a home for sale and need $5,000 or less for repairs, an FHA 203b insured mortgage may be for you..
Mortgage funds are disbursed to borrowers and their lenders in a single loan amount, as with most conventional mortgages. Many foreclosed homes owned by the FHA and its parent agency, the Department of Housing and Urban Development or HUD (Housing and Urban Development), also qualify for loans from the FHA.
FHA 203k Loans
FHA 203k mortgages are often referred to as rehabilitation mortgages, because they are intended for homes in need of significant rehabilitation/remodeling.
For example, you may find a house that needs roof stripping plus extensive foundation work. An FHA 203k mortgage is disbursed in several stages, including the amount needed to purchase the home and then in additional distributions as the repairs are completed.
The houses owned by HUD that need significant repairs are also offered through auction on their website and may qualify for mortgage financing FHA 203k.
Home Appraisals for FHA 203b Loans
If you buy a home with an FHA 203b loan, you must undergo an FHA-specific home appraisal or appraisal.
ANDThis measure is in place to ensure that homes purchased by eligible applicants meet the agency’s safety guidelines. For example, an appraiser performing the FHA 203b appraisal of the house will examine the electrical system to guarantee its safety. As usual, minor repairs identified in these appraisals must be completed before the buyer closes on your loan.
Home Appraisals FHA 203k Loan
The appraisal of a home for an FHA 203k loan takes into account the projected post-rehabilitation value of the home.
For example, you may find an $80,000 rundown house and need another $80,000 for repairs. The evaluation of the house for you FHA 203k loan will determine if the deteriorated house will actually be worth $160,000 after rehabilitation. Depending on the mortgage lender FHA 203k, you may request an appraisal of the current value of your deteriorated home, in addition to a post-rehab projected value appraisal.
FHA Loan Guidelines
FHA-insured mortgages are attractive to homebuyers with poor credit and relatively low down payments. The conditions for FHA 203b loans Y 203k, are generally the same.
The FHA has a minimum credit score requirement of 500 for a 10% down payment and 580 for a 3.5% down payment. However, FHA lenders may have more stringent credit score requirements.