First time home buyers often have little cash and need a home loan that allows a low down-payment. The FHA 203 K home loan is a great option for those who need a low down payment, help with closing costs and help fixing up their new home.
FHA 203 K Home Loan Down-payment
The FHA 203 K home loan is a mortgage that is insured by the Federal Housing Association. As of January 1, 2009 there is a minimum down payment amount of 3.5% of the purchase price of the home. The requirements have tightened up somewhat and many of the programs designed to help first time home owners with down-payment grant funds do not qualify for an FHA loan, so it is a good idea to speak to a mortgage broker about this if the buyer wishes to use grant funds for a down payment.
FHA 203 K Home Loan Closing Costs
An FHA backed home loan allows for the seller of the property to contribute up to 6% of the purchase price towards the cost of closing. Closing costs are the total amount of funds required over and above the down-payment to purchase the home. Typical closing costs are between 3-5% of the cost of the home, which means that with 6% concession from the seller, a first time home buyer using the FHA home loan may not have to pay any of the closing costs.
FHA 203 K Home Loan For Repairs
A typical FHA home loan requires a home to meet what are basic FHA standards. This means that there are no obvious repairs required in order to live in the home. This includes cracked windows, peeling paint, broken walls, etc. The FHA 203 K home loan allows a borrower to get a loan for the cost of the house plus up to $35,000 for the cost of repairs.
There are many requirements attached to this loan, including the fact that the repairs are completed by a licensed contractor, started within a certain time frame and completed within a specific time frame. For details on the requirements of an FHA 203 K home loan, visit the US Department of Housing and Urban Development site.
If a first time home buyer is strapped for cash for a down-payment and closing costs, the FHA home loan is a great option. With a low down-payment requirement and up to 6% seller concessions towards closing, it is possible for many first time home buyers to realize their dream of home ownership.
Learn more about the home buying process and how to make an offer on a home.
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