Looking for a program to remodel a home?
Check out 203k mortgage loans.
Minimum Down Payment: 3.5% typically or you can get a foreclosed home from HUD for $100 down
Minimum Credit Score: Varies but it’s very hard to get this program if you have a score below 580.
Maximum Loan Amount: Same as FHA limit
Maximum Debt Ratio: 56.9%
Rental Property: Available if you buy a 4 unit property and live on one of the units
Looking to rent out the home? Check out Fannie Mae Homestyle instead
203k is a type of FHA loan that allows you to remodel a home. There’s the full 203k for structural remodeling, adding rooms, etc and the limited 203k for basic remodeling. On the limited program, your remodel is limited to $35,000.
Yes! On the full 203k, you can defer your payments for up to 6 months while the home is being remodeled if you are temporarily unable to live in the property.
Yes. The 203k program is designed for owner occupants. If you are looking for a renovation mortgage program for an investment property, check out Fannie Mae Homestyle instead.
Chapter 7 bankruptcy is allowed on your credit report when applying for a 203k mortgage. However, it needs to be discharged for a minimum of 2 years.
FHA allows mortgage approval for the 203k with a Chapter 13 bankruptcy as long as it’s at least one year from the file date. If the bankruptcy has not yet been discharged, court approval is required. Additionally, manual underwriting and special scrutiny is required if it has been less than 2 years after the Chapter 13 bankruptcy discharge.
FHA allows you to have a foreclosure on your credit report. However, it must have been at least 3 years since the date the sheriff filed the deed with the county. Sometimes, this can be weeks or months after the actual Sheriff’s Sale. Deed in Lieu, where you just deed the property to the mortgage company falls under this same requirement.
We can finance a 203k with up to a 55% debt ratio. This is way higher than what other mortgage programs allow and one of the benefits of using FHA mortgage financing.
You can qualify for an 203k mortgage with as little as 3.5% down for a standard home. You can also combine this program with HUD’s $100 down program to buy a foreclosed home.
It is possible to get approved for FHA financing with chargeoffs on your credit report. These do not need to be paid back before closing.
Any unpaid collection account needs to have a payment plan or be paid off before closing. If not, 5% of the unpaid collection balance will be used toward your debt ratio calculation. If your total unpaid collections are $2000 or less, this requirement is waived.
Medical collections are ignored in debt ratio calculations and do not need to be paid off before closing.
It is possible to get approved for FHA mortgage financing with installment and credit card lates on your credit report.
You can’t have more than 2×30 mortgage lates in the past 12 months when applying for any FHA loan program, including 203k.
Student loans have special rules when you are applying for FHA financing. When you are on deferment or using income based repayment, 1% of the outstanding loan amount is used for qualifying purposes. Additionally, delinquent student loans that are charged off to the government need to be settled or refinanced.
When applying for a FHA mortgage, the file is submitted to FHA’s approval program called Desktop Underwriter (DU) to make a credit decision. This program takes into account the credit score, the debt ratio and savings (called reserves in the lending industry) to make a yes or no credit decision.
You can refinance a different type of mortgage loan to an FHA mortgage loan. FHA to FHA refinancing, which is called streamline refinancing, can be done with lower closing costs. Additionally, if you own a property with equity, you can do a cash out refi to pay down debts or improve the property. However, with a cash out refi, you are limited to 85% of the property’s appraised value.
In the Dayton metro area and most of Ohio, the 203k program is capped at the FHA limit. We also offer other mortgage programs to borrowers that are over the FHA loan limit. Please reach out to discuss your options.
Overlays are additional credit requirements over and above what FHA requires. We do not have overlays. We do our underwriting at FHA minimum rule