2016 FHA 203k Loan Requirements as all other loans have minimum credit scores and debt to income ratios that they need to abide by to get approved. If you don’t know, an FHA 203k loan is where a home buyer can purchase a property or foreclosure that might need some work done to the home. When a lot of lenders are getting away from rehab loans, FHA is still there to offer assistance if you meet the requirements.
First of all, 2013 FHA 203k Loan Requirements say that the borrower must have at least a 580 FICO credit score just as if he was getting approved for a standard FHA Loan. And just like the FHA Loan there is a minimum down payment required of 3.5% however, there are a lot of lenders out there who view these loans as higher risk so they have lender overlays which makes the minimum FICO and down payment to be higher in order to get the loan approved. 2016 FHA 203k Loan Requirements also have a debt to income ratio ceiling at 56.9% backend with a credit score of at least 620. Backend ratio refers to the ratio of all monthly debt against your gross monthly income. If your FICO credit score is under 620, you are going to be forced to have a backend ratio of 43% which is significantly less for having a lower FICO score. Even though the max debt to income backend ratio is 56.9% you might still see lenders use lender overlays to ensure the backend ratio is under 50% or even 45% since lenders don’t want to take on the risk.
There are two different types of 203k Rehab Loans available to be had under 2016 FHA 203k Loan Requirements. The first loan is a FHA 203k Rehab Streamline Loan which is an acquisition and construction loan with a maximum construction budget capped at $35,000. These loans are for homeowners in need of doing some rehab work to their current home. With this loan, the client’s existing loan will be paid off and refinanced to this loan with $35,000 held in escrow in order for the homeowner to do the proper repairs. There aren’t many limitations to what you can use the $35,000 for, but only the fact that you can’t do any structural work with the $35,000 such has room additions and foundation work. You can do anything else like basement remodel, bathroom remodel, new windows, new siding, new appliances, new flooring, etc. The other loan under the 2016 FHA 203k Loan Requirements is a standard FHA 203K Loan. Unlike the streamline loan there aren’t many restrictions at all and anything goes. You can use construction funds to do structural and cosmetic work all the same.
If you are looking for an FHA 203k mortgage lender who doesn’t have any overlays, then I am right for you here at www.loanconsultants.org. We can get you approved under the 2016 FHA 203k Loan Requirements and get you the house of your dreams, after you fix it up of course! Don’t hesitate and call today 888-900-1020 or email direct at email@example.com.