The 203K loan has certain specifications that must be met in order for it to go through. One of those stipulations is for the home to be owner occupied. This can seem like a Catch 22; however, as if you are having extensive work done on a home, it may be impossible to live there. In addition, most people that purchase a home to be fixed up cannot afford to pay that mortgage as well as a mortgage or rent for the place they are living while the work is done, so what is the solution?
The 203K Solution
The good news is that the 203K loan allows for you to live somewhere else for up to six months while the work is being done on your home. This is only allowed if the work being done on the home makes the home unlivable for the time being. The work must commence within 30 days of your closing date and be completed within 6 months. If you know that you will need to live somewhere else while the home is fixed, you can extend the amount of cash needed to include 6 months’ worth of mortgage payments. This raises the principal amount of your mortgage, yet allows for your 203K loan to be paid while you live somewhere else and pay for that place. The loan consultant handles the payments, which means you are not bothered in any way.
Who Determines the Livability of the Home?
Unfortunately, you are not able to determine if a home is habitable or not. The loan consultant is responsible for this decision. The expertise of this professional will help him to determine if the home is safe for everyone to live in while the work is being done. If large, structural changes are being made to the home or there are dangers, such as pest or mold infestations, chances are you will not be required to live in the home until the repairs are done.
Getting the Work Done in Time
The key factor in a successful 203K loan and living elsewhere is having the work done on time. As soon as the home is considered livable, the consultant will make sure that this takes place. In the end, the work needs to be done within 6 months of the start of the loan, but if the home is livable sooner than that six months, you will not have to worry about paying for somewhere else to live.
The bottom line is that if you are having major repairs done to a rundown home, you will not likely have to live there if your health would be in danger. The FHA and HUD make sure that your livelihood is protected while you do your part to rehab a part of the community that is run down. In the end, the 203K loan benefits many people including you as the purchaser of the house, but the community also benefits as the values of the surrounding homes are able to increase as a result of a foreclosed or rundown home being brought back up to code. With the ability to wrap up your mortgage payments for half of a year into your mortgage, you have the ability to fix up a home and live somewhere else, if that is what you choose to do. In the end, it will likely make the contractors work faster and the consultant to work harder in order to get you not the home that needs to be owner-occupied in order to pass the regulations of the FHA.Click to See the Latest Mortgage Rates»