FHA Loans in Chicago - Two Types you Need to Know About
Posted by: Ryan Dudley, Loan Officer, U.S Army Veteran (SGT.)
Much like anything put forth by the federal government, FHA home loans are filled with potentially complicated jargon and regulations. That being said, the upside to FHA loans is enormous. Lower credit standards and low down payments have people flocking to the lenders inquiring about the FHA home loan program. Being able to differentiate between a couple of the FHA loan programs is a great place to start when considering FHA financing.
Two of the major FHA programs are called the 203(b) and the 203(k). For what these two programs share in name, they differ in terms. For starters, the 203(b) program is a basic loan used to purchase or refinance a principal residence. With this program, the borrower can finance up to 96.5% of the purchase price (3.5% down) as long as they meet FHA credit qualifications. This is your standard, run-of-the-mill FHA loan. The other major program is the 203(k), which is uniquely designed to allow the borrower to purchase or refinance a property in need of rehabilitation. With this program, you can borrow the standard amount as allowed by FHA in a specific area plus the cost of remodeling. The caveats are that the cost of the remodeling must exceed $5,000, but offers no real figure on the other side. A house that must be demolished still can qualify for the financing as long as the existing foundation is in place. That’s not a bad idea for that fixer upper you’ve been looking at.
The FHA home loan program is a great way to qualify for a loan that allows little down payment as an option. Getting to know the loan program that best fits your needs is a great way to get started on applying for your next mortgage. Give United Home Loans a call at 708-531-8315 and let us take you the rest of the way.