In Brief: The 203k Home Loan

Before you can gain an understanding of what a 203k home loan actually is, you need to be introduced to the FHA home loan first. The FHA (Federal Housing Authority) offers home-buying candidates government loans. Since the government guarantees the loan, banks are less hesitant to lend the funds to individuals they would normally deny.

I am not saying that you will be borrowing money straight from our government, and I'm not trying to say that an automatic approval comes with every FHA home loan that is applied for. What I am saying, though, is that your likelihood of getting approved for an FHA loan is better than your chances at a private loan if you are somebody with bad credit. You can even be bankrupt and still get approved for an FHA home loan. One helpful element is the FHA loan's 3.5% down payment, which is about a quarter of a private lender's down payment requirement.

With the basics of an FHA loan covered, we can move on to the sub-categories of this style of loan, such as the several additional FHA loan programs that are available to potential homeowners. These programs can involve a normal fixed-rate mortgage of 30 years, plans of a shorter duration, or other plans with adjustable rates. You can even qualify for refinancing or get a home equity loan also.

Though there are several programs for purchasing homes under the FHA program, the one gaining the most popularity is the 203k loan. 203k loans include the helpful traits of a conventional FHA loan such as flexible credit and low down payments. But the 203k loan offers something unique, and that is its ability to make rehabilitating a house easy, meaning you can borrow to buy or borrow to renovate. Therefore, 203k loans are available to help people buy and rehabilitate preexisting houses or to help people make the renovations necessary to make their current home more livable.

The benefits of a 203k loan can impact an entire community by making their area more beautiful and valuable to all its residents. The new homeowner with a 203k loan will also gain significantly since he'll be able to finally buy his first home and potentially renovate it into his dream house. Due to how unstable the market for housing is these days, and by considering that everything I mentioned earlier is included in a 203k loan, it's a wise decision to look into an FHA program, such as those offered by HomePath Loans in order to buy your first home.

Just think about all of those foreclosed homes that are available on the market and only need a bit of rehabilitation. If you get a 203k loan, you will have to opportunity to buy one of these homes and rehabilitate it into the home you've always longed for.