- The Federal Housing Finance Agency (FHFA) reports that homeowners lost more than half their equity from 2006 to 2009
- At that point the economic recession ended but home prices have continued to fall
- Finding a lender to make a loan is difficult although not as hard as 12 months ago
- Second mortgages all but extinct
THERE IS STILL ONE OPTION: The Federal Housing Administration FHA 203(k) Renovation Mortgage
- The FHA 203k is not just for buyers who want to purchase distressed properties as it allows them to roll the price of the house and renovations into a single loan
- Buyers of “non-distressed” homes can use the 203(k) if they want to do some work on their dream houses before moving in
- Current homeowners can use it to refinance and roll the costs of their home improvements into a new first mortgage at today’s low rates
- There is no limit on how much you can spend on your improvements as long as the total loan amount does not exceed the FHA maximum
- FHA maximum loan amounts range from $271,050 to $729,750 in the country’s high-cost areas
- The “as improved” appraised value of your property must be higher that the maximum loan amount
- Almost ALL improvements are allowed except for luxury items
- Cost must exceed $5,000 and the existing foundation must remain in place
- The home can even be torn down!
- Inspection fees, architectural fees, closing costs and permits can be included in the new loan amount
- A $300,000 home can include a $100,000 remodel and the loan can be as high as $424,600
- If the appraiser says your $100,000 project will add $125,000 in value, then the loan amount can be $451,100
- The maximum loan amount, subject county-specific maximum loan amounts, is 96.5% of the improved value of the property
- There is no requirement for the property to be “re-appraised” once the work is finished
- The streamlined version of 203(k) is available for minor home improvements under $30,000
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