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FHA 203k Loan in Hardee County, Florida

Does the sound of making a house yours rather than living with someone else’s tastes excite you? You should consider taking an FHA 203K loan to buy a fixer-upper and renovate it entirely before moving in.

Also known as a mortgage rehab loan, an FHA 203K loan allows you to combine the financing for purchasing a home and the related repair or remodeling costs.

It also makes it possible to roll in the improvement costs of the fixer-upper while enjoying less strict qualifying requirements than other renovation loans.

The only way to decide whether an FHA 203K suits your situation is to understand how the loan program works. And if you are a resident of Hardee County, Florida, you should also know how to get one in this county. Here’s everything to get you started with the 203K loan program.

A Brief Background on FHA 203K Loans

When the Federal Housing Administration (FHA) was formed in 1934, its primary goal was to incentivize money lenders to expand their loan coverages. Back then, there were high rates of defaults and foreclosures related to mortgages. Low- and medium-income earners were at the center of this chaos, prompting the FHA to intervene.

The FHA loan was an intervention to this problem and helped cover the risks lenders face when a borrower misses out on payments indefinitely. With time, many money lenders partnered with FHA to target first-time homebuyers with zero credit history and low credit scores. This move boosted the economy since borrowers who didn’t qualify for conventional home loans had a chance to own a home.

The FHA 203K loan also came into the picture to help low-income earners purchase used homes and upgrade them to their tastes. It doesn’t cater to high-income earners since their property location preferences are in newer and highly-developed parts of a city.

What Makes up an FHA 203(k) Loan?

FHA 203K loans were designed to encourage low- to moderate-income households to purchase fixer-uppers or homes that urgently need repairs. Most of these homes are usually located in senior communities and can be transformed into something appealing with the proper repairs.

The FHA 203K program can allow you to fund a home purchase and renovate the property under one fixed-rate home loan or adjustable-rate mortgage. With this advantage, you’ll only make one application for one inclusive loan rather than two separate applications for a mortgage and a renovation loan. You can also take the loan to cover temporary accommodation expenses when rehabilitating the fixer-upper.

It’s common for lenders to be unwilling to originate loans for properties that require urgent major repairs since their livability and safety standards are usually a concern. The government-backing on FHA 203K loans reassures lenders of originating these loans.

Once a lender disburses the renovation funds, expect them to be placed in a secure escrow account. The contractors will only receive payments after completing the work, which should take less than six months.

Interest Rates and Mortgage Insurance on 203(k) Loans

FHA 203K loans attract relatively higher mortgage rates than traditional FHA loans. Though these rates range from 0.75 percent to 1.0 percent, they are lower than conventional mortgage rates.

Your 203K lender also expects you to pay mortgage insurance premiums on the loan. These premiums are split into an upfront fee of 1.75 percent of the full mortgage amount and a yearly premium of 0.85 percent (paid in installments of 12 months).

FHA 2039k Loans Vs. Construction Loans

Though FHA 203K loans count as construction loans in the FHA loan program, you can also get a construction loan elsewhere. A typical construction loan will have a short term to offer finances for rehabilitating or building a home.

The construction loan comes with a higher interest rate than a 203K loan. Even more, the funds will be disbursed as the renovation or construction takes place instead of a lump sum like the 203K loan.

Types of 203K Loans

The two main types of 203K loans include the standard 203K and the limited 203K. They can apply to different situations, provided you intend to occupy the renovated home as your primary residence.

The FHA 203K program also mandates that a HUD-certified contractor do the repairs. However, if you qualify as one, you can oversee the repair work and use the hiring costs saved to add more renovations for the labor.

Standard 203K

If the property requires extensive repairs or structural work with no cap on the repair cost, consider the Standard 203K loan. The loan offers a minimum amount of $5,000 while requiring the property’s total value to fall within the FHA loan limits for that particular region.

You can use the Standard 203K loan on repairs such as bathroom and kitchen remodeling, heat and air conditioning systems, painting, flooring, and plumbing. Other improvements covered by this loan include window and door replacements, the addition of energy-efficient systems, improving access for people with disability, landscape improvements, and improving health and safety standards.

Note that renovations that seem luxurious or extravagant such as swimming pool construction or adding pavilions and tennis courts, are excluded from the Standard FHA 203K loan coverage. You should look for other sources of finances if you want to make these improvements to the property.

Limited 203K

You can use the Limited 203K loan (capped at $35,000) to pay for renovation work on a property that doesn’t require much work.

The loan only covers minimal repairs rather than structural work such as landscaping and adding new rooms. It’s vital to ensure the property is habitable during the renovation period for the Limited 203K loan requirements to apply.

Ways to Use an FHA 203K Loan in Hardee County, Florida

Before applying for an FHA 203K loan, you need to note that the loan can only finance home improvement or renovation projects that take less than six months after closing to complete. This is why the FHA limits these projects to modernization, improvements, reconstructions, and structural alterations to the function of a home.

You need to work with a contractor knowledgeable about the 203K loan process, mainly the payment requirements and schedule. In this case, always ask the contractor about their specialized experience with the FHA 203K loan program.

And once the work is done, you need to submit a letter of completion to allow a HUD-certified consultant to evaluate the work. A list of consultants working across the country can be found on the FHA official website.

Acceptable Repairs

There are different kinds of repairs or improvements the FHA 203K loan program allows on properties. With a Standard 203K loan, here are some of the acceptable repairs:

  • Improvements and modernization to the home’s function.

  • Changes to eliminate obsolescence and improve the appearance.

  • Structural alterations as well as reconstruction.

  • Elimination of health and safety hazards.

  • Replacing or adding floor treatments and floors.

  • Adding or replacing gutters, downspouts, and roofing.

  • Replacing or reconditioning plumbing (for instance, well or septic system installation).

  • Significant site improvements and landscape work.

  • Making energy-efficient improvements.

  • Enhancing accessibility for people with disabilities.

What isn’t Permitted

The FHA 203K loan program doesn’t cover projects such as the construction of co-ops on a renovated home. However, specific improvements can be allowed on mixed-use properties with residential and commercial space, provided the projects are for residential use.

As a general rule, the project has to help upgrade the attractiveness or function of the home for it to be financed with a 203K loan. The renovation loan won’t cover expenses on the following luxury add-ons:

  • Hot tub
  • Swimming pool
  • Barbecue pit
  • Tennis court
  • Satellite dish
  • Outdoor fireplace

FHA 203k Rehabilitation Loans written on note book

The FHA 203K Loan Process in Hardee County, Florida

The Federal Housing Administration (FHA) only backs the FHA 203K loan instead of originating it. You’ll therefore have to apply through a credit union, bank, or any other FHA-approved lender listed online on HUD’s approved lender list.

The FHA doesn’t operate as a warranty provider or home insurer. This calls for purchasing warranties and home insurance for your home. And as you go shopping for a fixer-upper using a 203K loan, here are some steps to expect from the process.

  • Find a lender with official approval from the FHA to originate 203K loans. As you do this, gather as many mortgage quotes as possible to improve your chances of getting a better deal.

  • Once you narrow your options to a particular lender, it’s time to apply for the loan and obtain a pre-approval letter from a 203K lender.

  • With a pre-approval letter, you can look for home offers that allow you to use a 203K loan to complete the purchase. Remember that the loan limit calculator will differ for home purchases based on the Maximum Mortgage Worksheet compiled by HUD.

  • You also need to enlist the expert services of a 203K consultant in the event the renovation costs go beyond the $31,000 limit. The consultant will help you get a detailed proposal from trustworthy contractors containing the work scope and a detailed price estimate.

  • Ask a HUD-approved contractor to give a precise estimate of the materials required and the work needed. Unless you are a licensed full-time builder, the 203K loan program discourages you from doing the work yourself.

  • Once the lender gives you the green light to undertake the project, they will have the property appraised with or without the renovations.

  • Your FHA 203K loan can close, and contractors can start working on the project after the appraisal.

During closing, expect the seller to get paid while the remaining lump sum will go directly to your escrow account. The lender or their agent will only release the escrowed finances after satisfying that work is completed. And once the contractor completes the project, you’ll now be the official owner of a renovated house, which will have more value than its buying price.

FHA 203K Loan Requirements in Hardee County, Florida

Meeting the requirements of a traditional FHA loan is a prerequisite when applying for a 203K loan. The requirements include the following:

Down payment, Credit History, and Credit Score

203K lenders will require you to have a 580 credit score if the minimum down payment you make is 3.5 percent. They will also require a score between 500 and 579 when you make a 10 percent down payment. Besides this, at least three years must have passed since you had any foreclosure.

Mortgage Insurance Premiums

Mortgage insurance premiums on 203K loans take the form of an upfront fee of 1.75 percent of the overall loan amount and an annual fee of 0.45 to 1.05 percent. You can roll the upfront fee in your loan payments.

Loan Limits and Contingency Reserves

The general rule here is to keep your total 203K loan amount lower than the FHA loan limit in your region. The average loan limit for single-unit properties in Hardee County, Florida, is $420,680.

As for contingency reserves, your 203K lender will ask you to spare 20 percent of the improvement costs to cater to unexpected expenses. The lender may ask for proof if you want to pay out of pocket for unexpected costs, but your equity is low enough to roll the costs in your 203K loan.

Home Value

You can only borrow an FHA 203K loan as far as the property’s value goes. In this case, 203K lenders allow you to borrow the funds depending on the property’s after-improved value.

This grants you more borrowing power than other renovation loans that base the total loan amount on the existing “as-is” value.

When calculating the “after-improved” value, your lender will enlist the services of an FHA appraiser to have the home inspected and consider the work plan and expense estimates to determine the property’s work after the renovations are complete.

FHA 203K Loan Refinancing

It’s possible to use a 203K loan to rehabilitate the property you currently live in or buy a fixer-upper through a refinance. Even more, refinancing into a 203K loan shares similarities to the regular FHA refinance. However, you need to satisfy additional FHA 203K loan requirements.

You can also refinance an existing 203K mortgage through FHA’s Streamline program, which affords borrowers a relatively low-interest rate. After refinancing, part of the 203K loan proceeds will help pay off your outstanding mortgage balance. At the same time, the remaining money will be deposited into escrow until the renovation is completed.

Fun Things to do in Hardee County, Florida

At the Florida Heartland lies Hardee County, Florida, a hub for numerous thrilling outdoor recreational opportunities. As an adventure seeker, you enjoy activities such as fishing, paddling, and wildlife viewing, as discussed in this section.

Wildlife Viewing at Hardee County Wildlife Refuge

The Hardee County Wildlife Refuge is a great place to spend time with rescued and rehabilitated animals, most of whom are native to Florida. Take a walk through the high boardwalk at the refuge for the best wildlife viewing experiences.

Hiking at Paynes Creek Historic State Park

The natural scenery at Paynes Creek Historic State Park and the hiking trails make the park a must-visit location. Besides hiking, you can enjoy wildlife viewing, camping, birding, and fishing at the park.

Fishing at Hardees Lakes County Park

Hardee Lakes County Park boasts four fishing lakes with several boat ramps. There’s also a spacious park campground and bike and walking trails for your adventure.

Engage in Water Excursions on the Peace River

Peace River is a picturesque tourist attraction mainly for its kayaking, canoeing, and paddling opportunities. You can also snorkel at the banks of the river to double the fun.

Immerse Yourself in the Solomon’s Castle Experience

Deep in the lush woodlands of Florida lies Solomon’s Castle, a magnificent building featuring galleries and a workshop. It’s perhaps known for being the residence of Howard Solomon, a famed artist. Take meditative walks around the castle; if you want to rest, the surrounding oaks will give you the shade and fresh air you need.

Summing Up

Whether you want to remodel your property or refinance an existing 203K loan, an FHA 203K is the best solution for these needs.

Take time to weigh your options in the lenders’ pool, learn about the requirements and decide whether the loan makes sense for your situation before applying.

And if you decide to apply for an FHA 203K loan in Hardee County, Florida, work with a loan officer from Fairway Independent Mortgage Corporation for a smooth loan process.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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