Mortgage News March 3, 2023
A Request for Information in the Federal Register asking for input from the public about ways it can improve its Single Family 203(k) Rehabilitation Mortgage Insurance Program was published by the Federal Housing Administration (FHA).
FHA 203(k) loan insurance covers the current value of a home plus the cost of rehabilitation for those buying or refinancing a home. FHA strives to update the program so that it can more effectively serve as a tool for restoring single-family homes that require renovation to productive use. This is in keeping with the Biden-Harris Administration’s goals to increase the affordable housing supply.
The FHA’s Section 203(k) provides coverage for mortgages used for the purchase or refinancing and rehabilitation of at least a year old home. An escrow account is opened and the remaining funds are released towards the completion of rehabilitation after the seller is paid, or if it is a refinance, the existing mortgage are paid off. In order to qualify for an FHA mortgage, the rehabilitation must cost at least $5,000, but the property value must still fall within the FHA loan limit. In determining the property’s value, we multiply the appraised value by either (1) the property’s value before rehabilitation plus the rehabilitation costs, or (2) the appraised value less 110% of the property’s value after rehabilitation.
The Federal Housing Administration wants to provide improved financing options for homes that require significant rehabilitation according to Julia Gordon — Assistant Secretary for Housing and Federal Housing Commissioner. Getting feedback from today’s RFI will help them advance their goals of increasing the housing supply, reducing vacancy, and expanding homeownership opportunities for all.
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