Home Purchase Loans

FHA 203(b) Loan:

• Purpose: The FHA 203(b) loan is primarily used for move-in ready homes that require little to no improvements. It’s suitable for buyers looking to purchase a home without significant repairs.
• Eligibility: 
  • First-time home buyers: The low-down payment requirement is especially helpful for first-time buyers.
  • Real estate investors: Investors can use this loan, but the property must become their primary residence for at least one year after closing.
  • Current homeowners: If you’ve already bought a home and plan to sell it to buy a new one, the FHA 203(b) loan is a good option. It also works for refinancing and funding renovations on your current home.
• Key Features: 
  • Low down payment: You may be able to close on a home with as little as 3.5% down, allowing eligible borrowers to finance 96.5% of the home’s value.
  • Credit requirements: While the FHA requires a minimum credit score of 500, most lenders (including Rocket Mortgage®) require a higher credit score (minimum of 580).
  • Debt-to-income ratio (DTI): Lenders consider your DTI to assess other financial obligations you have.

FHA 203(k) Loan:

• Purpose: The FHA 203(k) loan is designed to help buyers finance homes that need at least $5,000 in necessary repairs or modifications. It’s ideal for properties requiring significant rehabilitation.
• Eligibility: 
  • Available for buyers purchasing homes in need of repairs.
  • The home must meet the minimum repair cost threshold.
• Key Features: 
  • Combines the home purchase and renovation costs into one loan.
  • Allows financing for essential structural repairs and additions.
  • Requires a minimum repair cost of $5,000.
  • Available as both a standard 203(k) (for major renovations) and a limited 203(k) (for minor repairs and upgrades).

Conventional Loan:

• Purpose:  Conventional loans are issued by private lenders such as banks, credit unions, and other financial institutions. These loans are not backed by the federal government. rehabilitation.
• Eligibility: 
  • Minimum credit score of about 620 to qualify.
  • Debt-to-income ratio under 43%
  • A down payment of 3% or more (20% if you don't want to buy mortgage insurance).
  • Homes must be structurally sound and habitable.
• Key Features: 
  • Available as fixed-rate, adjustable-rate, conforming, jumbo, and non-qualifying mortgages.
  • Conforming conventional loans have guidelines set by the Federal Housing and Finance Agency (FHFA).
  • Generally have lower interest rates and fees than government-backed loans but may require a higher credit score and a larger down payment.
  • If your down payment is less than 20%, you are required to pay for private mortgage insurance (PMI).
  • Available as both a standard 203(k) (for major renovations) and a limited 203(k) (for minor repairs and upgrades).

In summary, if you’re looking for a move-in ready home, consider the FHA 203(b) loan. If you’re purchasing a home that needs significant repairs, explore the FHA 203(k) loan. Each serves a different purpose, so choose based on your specific needs! 🏡🔧

Please note that these are general guidelines and individual lenders may have their own specific requirements.  It's always a good idea to check with your lender or a financial advisor for the most accurate and up-to-date information.

Happy hunting!  😊🏡 🏃‍♂️ 🏃‍♀️