What Are the Requirements of an FHA Section 203(k) Loan?
You can only obtain a Section 203(k) loan from an approved lender. Additionally, you will need a minimum credit score of 640, proof of income and employment history, a down payment of at least 3.5%, and tax returns for the previous two years. You also cannot have had any late payments in the past year, nor any foreclosures or bankruptcies in the past three years.
You must use a Section 203(k) loan to purchase and repair an eligible property. Eligible properties include:
1-4 unit homes that have been completed for at least one year
1-4 building condos (203(k) loans are only available to finance interior improvements)
Houses or units not onsite, but that can be moved to a property
Single units to be converted to multi-unit homes
Demolished or otherwise torn-down property with at least a portion of the original foundation remaining
A Section 203(k) loan is a useful way to pay for and repair an older or damaged house. This loan has a lower interest rate and the purchase is usually less expensive than buying a new property. You will also have a relatively longer period to repay this loan.
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