10 Sep How HUD’s 203(K) Program Can Assist Buyers
HUD’s 203(k) program is a beneficial program that assists home buyers who are looking to rehabilitate and repair single-family properties. Eligible properties include one- to four-family dwellings that have been built for at least one year. Demolished homes can qualify as well, but must have part of the existing foundation still in place. Additionally, 203(k) can be used to convert single-family homes into two-, three-, or four-family dwellings, or multi-family dwellings could be converted back to single-family occupancy.
So, how is 203(k) different from traditional mortgage financing? For one, the mortgage amount is based on the estimated value of the property after the work has been completed, and the program also takes into account the cost of the improvements. This happens as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. Whereas traditional mortgages are concerned with the condition and value of the property before the loan closes, 203(k) can overlook this aspect since the mortgage loan can be backed by HUD, which minimizes the risk to the mortgage lender.
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