Qualifying for an FHA 203K Loan

By KNKNKNKNKNKNKNK

Say you want to buy a house that needs some major repairs. One option you have is to purchase it under the FHA 203K Loan program, which is basically a loan that pays for your major repairs by adding those costs to the loan.

How to get started: Qualifying for this loan is like qualifying for any other mortgage. You will need to have a job, and the lender will check your debt-to-income ratio among other things. Then you are on your way.

1. Find a Realtor who is willing to take you through this process. It is a difficult way to buy, so you need to have an agent with some patience, calm and reserve.

2. Find a loan officer who is certified in doing FHA 203K loans. Not all lenders handle them, and only a few loan officers are trained to deal with them. You have to select a lending institution that is large enough to have staff trained for this loan process and capable of doing all the paperwork. Smaller lenders cannot handle this process.

3. Find the house. The loan program is designed to help pay for major repairs needed, such as roofs, siding, mechanicals and electrical boxes. However, you can get funds to do some upgrading and remodeling of the house as well. There are many excellent fixer-uppers out there that would be great candidates for this program.

4. Once your offer is accepted, you will need to start getting bids on the work that you want to have done. Some of the work can be done before closing---especially if it is essential to making the house habitable. Other work can be paid for after closing with funds held back or held in "escrow" by the lender. Many times, the lender will want to escrow more funds than necessary to ensure that everything is paid.

When you get your loan, an appraiser will make a determination of the value of the property in its present condition and in its future finished condition. Appraisals basically involve the appraiser looking at comparable sold properties in the area to determine a value for your property. The appraiser looks at a severely distressed property as being under construction, with the anticipated finished house being almost like new.

There may be a few variations in your particular FHA 203K Loan scenario, but this should give you a general idea of how to get started and what to expect along the way.

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