FHA Mortgages
Standard 203b Purchase
Standard 203b Purchase
Standard 203b Purchase
An FHA 203b Purchase Loan is ideal for first time home buyers and borrowers with lower credit scores.
203k
Standard 203b Purchase
Standard 203b Purchase
An FHA 203k loan allows home buyers to purchase a property and finance the rehab or construction costs with as little as 3.5% down.
Standard 203b Purchase
Standard Guidelines
Some standard guidelines to know when you are looking into applying for an FHA mortgage are the credit score requirements and the loan limits. For the most part the minimum credit score requirement in an FHA mortgage is 580. With a minimum credit score of 580 you can qualify for an FHA mortgage with a down payment as little as 3.5%. There are instances where a borrower can qualify for an FHA mortgage with a credit score as low as 500 but that will require a 10% down payment.
The loan limits for an FHA mortgage in 2023 are below...
- 1 Unit Property - $472,030
- 2 Unit Property - $604,400
- 3 Unit Property - $730,525
- 4 Unit Property - $907,900
Another factor to keep in mind is the borrowers DTI (Debt-to-Income) ratio. Generally the qualifying ratio is 43%. With an FHA mortgage, however, there can be instances or compensating factors allowing a borrower to qualify with a DTI into the 50% range.
203k
Guidelines
An FHA 203k mortgage is used to finance the property and any repair costs that may be associated with the project. There is the standard 203k mortgage and a Limited 203k mortgage. One major difference is the cost of repairs for each program. The Limited 203k loan cannot exceed $35,000 of repairs whereas a standard 203k mortgage can go above $35,000. Another difference is in the minimum repair costs. a Limited 203k loan does not have a minimum repair requirement. A standard 203k mortgage, however, has a minimum repair cost of $5,000.
The next difference to be aware of is the type of repairs for each loan. A Limited 203k loan is used for minor repairs and minimal structural rehab. A standard 203k loan would be used for major repairs and rahab projects. This is reflected in the different requirements in repair costs.
The next difference is the requirement of a HUD consultant. A HUD consultant must be used when using a standard 203k mortgage whereas a Limited 203k loan does not require a HUD consultant.
These loans must also fall within the FHA mortgage limits mentioned in the above section. There are two ways to determine this. The value will be determined by the purchase price plus the costs of the repairs or by using 110% of the after repair value of the assume as set by an FHA appraisal.
Please reach out to discuss these options further.