What is a good loan program?

What is, in simple language, the federal loan program called "203(k)" and how do you apply for it?

• I realize it is to help roll the cost of rehabilitation of a home into the mortgage, and you can also get up to 6 months of mortgage payments rolled into the loan as well, so that you're not paying your rent and mortgage at the same time during renovations - but what is the typical process assuming you can scrape together the minimum 3 or 4% for a mortgage of $250,000? In addition - what are the pitfalls, best approaches, and complimentary programs, to take with this type of loan?

• Answer:

  As an FHA Consultant and Contractor I have a perspective from the field. You ask about potholes and pitfalls? There are many - but they have little to do with the Department's Program and more to do with basic human tendencies. Folks want more than they can afford. An in-depth answer is too complex for this platform. There are just too many moving parts. But - with that said, here are a few tips: Create a wish list of repairs and categorize the list by location. HUD has mandated 35 Categories the cost items should be listed under. Your mortgage underwriter will ask that the bid be broken into a format showing materials and labor (with builder profit included in each). Your contractor will need to be licensed (based on your area) and insured. The lender will approve the contractor for the program. Not all mortgage lenders offer the FHA 203(k). Call them and ask. You (the borrower) will be totally responsible for communicating your needs, wants and desires. If your list of repairs meets a $35K threshold or more, the lender will assign a special inspector to help gather data for underwriting and to perform inprogress construction inspection Respond here and I'll help answer more specific questions.