If you are a homeowner in need of a home equity loan but you haven't yet built up any equity in your home and need to make improvements, don't worry, you have options. A 125% percent home loan may be the answer using the FHA 203K program.
The 125 percent FHA 203K home loan is offered by various online lenders. Most lenders will have their own qualification and loan term guidelines and 'overlays, but generally are driven by credit score, need for improvements, and the same qualification matrix used by the FHA. Credit score driven means that you have to have a certain credit score to qualify for the loan usually 640 but HUD will allow down to a score of 580. In addition, your credit score usually determines the maximum loan amount you may qualify for and the maximum cash in hand you may receive. Also, some 203K home loan lenders may require seasoning on the length of time you have lived in your home. Three months is normally the minimum.
When it comes to a property appraisal, all 203k loan lenders will require you to obtain one. They generally will use the purchase price of your home as the value if you have lived in your residence for 6 months or less. If you have lived in your home over 6 months, a recent tax assessment, the value of the appraisal can appraisal can be used. When doing a 203K appraisal you must submit bids and the scope of work to the appraiser so that a value based on improvements can be calculated.
For more information on FHA 203k equity loans, or to compare rates and programs of 125% rehabilitation loan lenders visit http://www.checkrates.com and select the tab marked “FHA”.