California FHA 203k Loans Guidelines For Buyers Of Fixer Uppers (or Home Renovations)
Demolition or Renovation: Advice for California homeowners contemplating demolishing their California homes or renovating their California homes with a FHA 203k Loan
California has one of the highest housing prices in the nation.
Average home prices in the state of California is $437,873 versus the national average of $228,900
As the economy nationwide is booming, so is the housing market in California
Both HUD, VA, and the Federal Housing Finance Agency (FHFA) realized this
HUD and FHFA has has increased FHA, VA, and Conforming Loan Limits in all counties in California including high cost areas for two years in a row
As California’s housing stock ages, home owners are making decisions when purchasing an older home, “do I knock down the existing structure and rebuild new, or do I renovate”
California FHA 203k Loans are more popular than ever
Never since the inception of California FHA 203k Loans has the interest of California FHA 203k Loans been so popular
FHA 203k Loan applications in California has been going up double digits every year since 2012
Benefits Of California FHA 203k Loans Versus New Home
HUD’s FHA 203k Loan Program allows home buyers to buy fixer uppers and/or foreclosures with 3.5% of the after improved value costs.
For example, if the acquisition cost of a fixer upper is $100,000 and renovation costs is $100,000, the after improved value is $200,000
Home buyers are required 3.5% of the after repaired value of $200,000 or $7,000 down payment
Up to 6% in sellers concessions is allowed per FHA Guidelines so most buyers do not have to worry about closing costs and just need to worry about the down payment
The decision usually comes down to “dollars and sense”.
At what price point you’re able to purchase the property
How much you can afford in the construction budget
And perhaps the most important consideration is what the value of the property will be once it has been completed
In nearly every case involving renovating or rebuilding a one to four-unit, FHA’s 203K Program is the solution.
In our 21st Century West Coast Economy, cash is King
If consumers have the cash and keep it in their pocket
Interest rates are low
Why pay 20% to 25% down payment on a California home construction financing when with a California FHA 203k Loans the minimum down payment requirement is 3.5% down payment on a home purchase
Many parts of California is classified as high cost area
FHA maximum loan limit in high cost areas of California is $679,650 for single family homes
What Is A FHA 203k Loan?
HUD, the parent of FHA, implemented and launched the FHA 203k Loan Program to promote buyers to purchase fixer uppers and foreclosures and revitalize neighborhoods. FHA 203k Renovation loans are becoming increasingly popular not just throughout the state of California but throughout the nation. Creative home buyers can literally end up with a custom brand new home by utilizing the FHA 203k Loan Program.
Here are the qualification requirements to qualify FHA 203k Rehab Loans:
Meet all FHA Guidelines
580 credit scores
3.5% down payment on acquisition and construction of the after improved value
Non-Occupant Co-Borrowers allowed
Up to 6% sellers concessions
Up to 50% debt to income ratio
Outstanding Collections and Charged Offs do not have to be paid off
Quiana Williams of Gustan Cho Associates Mortgage Group has no lender overlays on FHA 203k Loans
Types Of FHA 203k Renovation Loans
There are two types of FHA 203k Loans:
FHA 203k Streamline Loans:
This enables homeowners to do cosmetic repairs with maximum $35,000 construction budget
Standard California FHA 203k Renovation Loans:
No limit on construction budget
Can do a complete gut and rehab project
Room additions allowed and can had more bedrooms and bathrooms
Maximum loan limit on acquisition and construction is per loan limit in area
How Does FHA 203k Loan Program Work
Homeowners who want to demolish and rebuild, FHA 203K Loans allows homeowners to include the cost of renovation of the home in the loan amount;
Demolition of a property and the rebuild using the existing footing with the FHA 203k Streamline Rehab Loans where the maximum budget is $35,000
Homeowners can do major room additions with the full Standard FHA 203k Renovation Program where there is no construction limit
Or you can break down the property to its shell and replace all the mechanical, electric, plumbing, HVAC, etc
Homeowners can move walls, put on an addition, add a garage, completely re-landscape, add luxury items like high end fixtures and finishes
Buying A Fixer Upper With A California FHA 203k Loan
I’m also seeing more buyers looking at properties that haven’t been updated in over forty years.
They’re nice, clean, structurally sound buildings that can, because they’re dated, be purchased at a bargain
Buyers are using 203K to replace the kitchens and baths, flooring, even moving walls to open the floor plan
There is a way to buy a house with no money down payment
How to buy a house with no money down
There are some good tips there if you are a newbie and you want to purchase a house and you don't have money right away
There’s not a more versatile loan product on the market today. It’s the only loan product that’s gotten better and easier with age. Years ago these types of transactions were nearly impossible to close. Now they close on time and have become a great tool for Real Estate Professionals all over the country.
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