FHA 203k Loan in Jefferson County, Florida

Moreover, it has lenient borrowing qualifications, making it a fair deal if you have a limited budget. Here's what you should know about an FHA 203(k) loan and what it takes to obtain the mortgage.

Understanding FHA 203(k) Mortgages

The government enacted the National Housing Act through the US National Congress, creating the Federal Housing Administration (FHA) in 1934. The FHA 203(k) is part of the larger FHA-insured mortgage. Its inception dates back to the 1930s, when foreclosure and default rates increased dramatically as a result of the Great Economic Depression.

The government aimed to reduce unemployment rates and enhance homeownership among low and middle-income households. As a result, the FHA introduced a subsidy to cushion mortgage lenders against financial losses if borrowers don't pay their loans. In addition, the FHA introduced various loan programs, including the FHA 203(k) loan.

The Section 203(k) loan is a unique mortgage product enabling you to borrow funds to buy the property and retain extra cash for renovations.

The FHA doesn't directly provide the funds but guarantees financial protection to approved lenders who give you the mortgage.

As a general rule for government-backed mortgages, the home you wish to buy or renovate must be your primary residence, not a commercial investment scheme.

Types of FHA 203(K) Loans

The FHA administers two types of mortgage rehab loans: Standard 203(k) and Streamlined 203(k). Although both loan products have a mutual purpose, they have varying loan limits, eligibility requirements, and respective permissible projects. Therefore, it is advisable to understand both loan types to choose what meets your housing needs.

Streamlined 203(k) Loan

The streamlined loan, also known as a limited loan, funds minor renovations and cosmetic repairs. For this reason, the loan doesn't have a minimum amount to borrow, although the maximum limit is $35,000.

The loan would serve you best if you wish to fix new flooring designs or remodel your kitchen. It's also ideal for purchasing a condominium, townhouse, or living property with one to four units.

Generally, if you're taking a streamlined 203 (k) loan, you should complete the project within six months.

A streamlined loan can help you accomplish the many renovation tasks, including;

• Roofing, gutters, and downspouts repairs.

• HVAC system upgrades.

• Flooring repairs.

• Electrical and plumbing tasks.

• Home remodeling without structural alterations.

• Indoor and exterior painting.

• Accessibility enhancement for the disabled.

• Window and door replacement.

Standard 203(k) Loan

A standard rehab loan covers extensive repair works and structural alterations exceeding the $35,000 mark. For this reason, most lenders will allow you to borrow a minimum loan amount of $5,000 for your renovations under the program's standard.

Funding under the standard rehab mortgage may also involve purchasing a single, double, triple, or four-unit property if it meets the government's property requirements.

A standard 203(k) loan covers the following renovation tasks;

• Relocating a present residence to a new foundation.

• Significant structural alterations, including pulling down the walls.

• Pest remediation and repair of pest-related damages.

• Improving home function or enhancing modernization.

• Eliminating safety hazards such as lead-based paints.

• Plumbing reconditioning.

• Energy efficiency improvements.

• Landscape improvements; patio and terrace installation.

Home Improvements Exempted From the 203(k) Loan Coverage

Generally, the rehab loan doesn't cover renovations that don't enhance the property's aesthetic appeal. In addition, mixed-use properties having residential and commercial spaces may not qualify for coverage.

Luxurious amendments also form part of ineligible expenses under the rehab program. They include new swimming pools, tennis courts, pavilions, hot tubs, barbecue pits, and outdoor fireplaces.

General Qualifications Governing FHA 203(k) Rehab Loans

Unlike regular mortgages, the rehab mortgage program has flexible loan terms, thanks to minimal risk of financial loss for the lenders. That aside, most lenders have a minimum threshold you should attain when applying for a mortgage.

Mortgage Rate Type

You can opt for a fixed or adjustable interest rate depending on your needs. In addition, most lenders accept a 15-year or 30-year loan term.

Loan Limits

The rehab loan adopts loan limits similar to other government-backed mortgages. For this reason, your borrowing limit will depend on your geographical location and state. Low-cost counties have a lower limit capped at $420,680, while high-cost counties have a higher loan limit capped at $970,800.

Down Payment

The mortgage provides an affordable solution for borrowers with little cash to pay upfront. With a credit score of 580 or more, you'll only need a 3.5% down payment of the total loan amount. On the other hand, a credit score of 500-579 guarantees you a down payment not exceeding 10% of the total amount.

You need not worry if you're cash-strapped since you can get down payment assistance from accredited lenders and nonprofit organizations. Down payment assistance comes from low-interest loans, grants, and forgivable loans payable over an agreed period. Talk to your mortgage financier about the possibility of qualifying for down payment assistance.

Credit Score

Commercial lenders require a score of 620 for a standard mortgage, with some demanding up to 740. However, FHA 203(k) loans bring great relief with a minimum credit score of 580.

That said, a credit score within the 500 range guarantees you a loan if you increase your down payment to 10% or more.

Mortgage Insurance Premium

FHA-approved lenders will charge you a mortgage insurance premium to cover unforeseen losses. For this reason, you should factor in insurance costs if you pay less than 10% of the total loan amount upfront.

Initially, you'll pay one-off mortgage insurance of 1.75% when closing the loan. Afterward, you'll pay an annual insurance rate of 0.45%-1.05% of the loan amount spread in equal monthly installments.

Income and Debt Limit

Mortgage lenders pay much attention to your DTI ratio, which accounts for the amount of your gross income that settles your monthly debts. A maximum DTI ratio of 43% is ideal, although you can still negotiate with a 45% debt ceiling if you have a good credit score.

Regarding income, the FHA doesn't have a stringent limit to obtaining the loan. Lenders, however, require proof of adequate income to meet your monthly loan obligations. In such instances, your pay stubs, income statements, bank statements, and tax returns will play a significant role in ascertaining your income level.

Foreclosure and Debt Payment

Most approved lenders will scrutinize your debt payment history to determine your reliability in loan repayment. For this reason, financial institutions may be reluctant to give you a loan if you have unpaid income tax and utilities such as rent.

Similarly, a foreclosure history can reduce your chances of acquiring an FHA 203(k) rehab loan. Thus, if you have had a foreclosure within the past three years, try to resolve it with your previous lender to boost your credit score.

Don't Move Policy

Did you know you can modernize your current residence to the desired standard without moving to a newer home? Some mortgage financiers have an attractive 'don't move policy' enabling you to refinance your current mortgage. And what's more, mortgage refinancing comes with massive benefits.

First, you can refinance your mortgage into newer streamlined terms with lower interest rates and repayment periods. Thus, you'll save substantial income from the government-backed lending rates.

In addition, loan refinancing gives you extra cash for home renovation. You'll have a lifetime opportunity to modernize your home with the following customized additions;

• Add the square footage for more space.

• Add a new bathroom for guests and relatives.

• Add cosmetic finishes to the interior and exterior.

• Renovate an existing pool to enhance its aesthetics.

203(k) Mortgage Application Process in Jefferson County, Florida

All approved lenders have a formal application process for interest buyers. If you wish to get the loan, it is advisable to familiarize yourself with the application process, so you know what to expect.

Below is a summary of the 203(k) loan application process:

Find an Approved Lender

The first step is to find a suitable lender for your home project. Ensure the lender is FHA-approved and has experience issuing government-insured loans. The lender will analyze your financial profile and help you find a mortgage product that best suits your financial capability.

Obtain Mortgage Pre-approval

Mortgage pre-approval is a critical step and a standard practice in the real estate sector. Here, the lender gives you different sales prices and renovation amounts and ascertains if you qualify for the mortgage. Afterward, the lender provides you with you an official pre-approval letter.

Search for a Suitable Property

Your search for a perfect property begins once you get a pre-approval letter. An important consideration during the property search is ensuring it meets the FHA guidelines on structure, living units, and safety standards, among other essential considerations. You should also have a wish list of the type of renovations you want.

Find a Professional Contractor

In addition to finding a suitable property, you should look for a qualified contractor for the proposed project. Ensure the contractor has a good reputation, valid practicing license, liability coverage, and proven experience in repair works. The contractor will also come in handy for a project estimate, including labor and material costs.

Hire a Consultant

An FHA-approved consultant comes in handy to oversee the construction and approve payments to the contractors upon completion. The consultant may be an architect, inspector, or construction official with knowledge of FHA 203 (k) home renovations.

Complete the Loan Application

The loan application process isn't complete without filling out an application form. The form captures essential information, including your identity and a proposal showing the scope of work. You'll then submit the form and the sales contract and bid estimates to the lender for processing.

Home Appraisal and Inspection

The lender has the power to deploy an approved appraiser to survey and inspect the property for pest damages, drainage, and other essential features. The appraisal also ensures the property meets the minimum standards required by the FHA.

During the appraisal, the lender will also give you a credit approval depending on your income and the credit information you provided. Once approved, your mortgage financier will schedule a convenient date for the loan closing.

Loan Closing

The closing involves signing the final paperwork to complete the loan application. Upon closing, the lender will disburse the funds to cater to the cost of the property and keep the balance in an escrow account until you complete the repairs.

Renovation

Your planned renovations will kick off officially when you complete the closing and send the relevant building permits to the financier. The contractor should complete the project within the stipulated timeframes.

Final Inspection and Closing Escrow

The lender will order another property inspection as soon as the contractor completes the project. The inspector will then write a final report, allowing the lender to disburse payment to the contractor. Once the lender closes the escrow account, your mortgage officially becomes a standard rehab loan.

Top 5 Desserts in Jefferson County, Florida

Jefferson County is a rural dwelling in the northern part of Florida. The county derived its name after America's third President, Thomas Jefferson, who passed away a year before its official inception.

Jefferson County offers plenty of opportunities for recreation and quality living. Being Florida's third most rural dwelling, it boasts a beautiful natural environment with gentle hills, a wooden landscape, and an ideal climate for outdoor activities all year round.

Moreover, Jefferson's vibrant food culture features diverse cuisines, specialties, and unique flavors. Top among them are desserts, which are essential to every course meal.

Below are the top 5 desserts you may find in Jefferson, Florida:

Key Lime Pie

Top on the list of favorite desserts is the key lime pie. Although culinary experts believe the pie originated from the Florida Keys, it has since spread across the state, attaining the status of the official state dessert.

The delicacy consists of yellowish-greenish key lime and a crown of cracker crust. If you're looking for mouthwatering key lime pie, restaurants like Rev Café won't disappoint.

Sandwich

Sandwich is one of the trendy desserts served hot or at room temperature in various food outlets. The Cuban sandwich, for instance, is an all-time delicacy introduced by Cuban expatriates in Florida.

It comes from layered bread crust with cheese, roasted pork, and some mustard pickles, although some restaurants may add a tomato sauce. Top restaurants like Brick House Eatery, Subway, and Rev Café serve the most delicate sandwiches across Jefferson County.

Fresh Strawberries

Florida is a well-known strawberry hub with a bountiful harvest in early spring. If you're visiting Jefferson County during the strawberry season, you'll no doubt find fresh strawberries from the local farms and fruit outlets. The strawberry season is also the perfect time to try out strawberry cuisines like strawberry shortcakes and smoothies.

Yogurt

It is not uncommon to find Jefferson residents sipping yogurt as they unwind in the summer climate. In Jefferson, restaurants and yogurt shops sell the dessert in sweetened and flavored forms to enhance the taste.

Whether you want strawberry, orange, lime, chocolate, or plain yogurt, you're assured of finding quality yogurt that meets your taste. Popular outlets for quality yogurt in Jefferson County include Scoops & Waffles and Electric City Wheels & Grinds, among others.

Burgers

Florida is one of the few states with a booming burger-eating culture. It boasts over 2,000 restaurants serving hamburgers across different counties, including Jefferson.

A common hamburger in Jefferson County is blended beef and pork with pepper or cumin seasoning. You could crown it all with onion chopping and potato crisps.

Some well-known hamburger outlets in the county include Burger King and Mann's Dog House in Monticello City.

FHA 203 (k) Loan - Is It a Good Idea?

Are you cash-starved yet looking for alternative ways to own a decent home? An FHA 203(k) mortgage allows you to buy and upgrade an old house without drawing the home equity. It comes with lenient borrowing terms, including a lower credit score, cheaper down payment, and reasonable income limits.

Compare different terms from approved lenders to find the best renovation mortgage that matches your needs.