Smart Two03k Home Buying

Controlling the controllable

The circumstances which can lead to mortgage payment default are many; Some within a homeowner’s power to control and others are not. In the case of an event beyond the powers of a home owner to control, mortgage holders have been known to extend a helping hand by providing a grace period or temporary reduced payment until circumstances improve some normalcy is restored and the home owner can resume regular payments.

Events which qualify for this type of lender assistance may be illness, death, divorce, and in some cases, unemployment. In some rare cases, like a recession or governmental order, mortgage holders have provided similar assistance to their mortgage customers. However, when a default occurs which could have been avoided, there is little help or sympathy from the lender or anyone else, because proper steps to such avoidance were not taken by the home owner.

At the moment when a decision is made to purchase a home, several questions may enter the mind of the decision maker(s) and conversation topics probably range from affordability to property type and neighborhood. Generally, home shoppers are able to determine what they can afford to pay for monthly housing expenses, so the affordability factor is usually well thought out; and invariably they would have already decided on what type of home is suitable enough to meet their family’s needs, as well as where it should be located.

Home buyers at times insist on a professional engineers report, or in the very least, a professional property inspector’s report so that they could have a complete understanding of the property’s physical condition. Obtaining one of these reports (more home buyers opt for the inspection report based on cost, but the professional engineer prepares a more comprehensive report which is justifiably more expensive) equips a home buyer with any physical defects that may exist in the home and that’s the extent to which many buyers will go, unless there’s a glaring defect, in which case the transaction could be in jeopardy.

It is at this juncture in the transaction when every home buyer should make a decision to grasp control of a circumstance which have caused many a home owner to unwittingly default on mortgage payments. Unexpected repair of major working components in a home – heating/air conditioning, plumbing and electrical components, among others – have been known to create havoc with a family’s budget and as a result causes delinquency in mortgage repayments. This is the kind of controllable circumstance I refer to.

Home buyers can control the occurrence of unexpected repairs in the home they are purchasing by utilizing a special government program which is offered by many HUD-approved lenders. Home buyers would need to inquire about it at the time of purchase. I said special because it is my opinion that it is a truly special gift which enables the borrower to make a decision that could eliminate potential budget shattering, unexpected repairs far in advance of when they are likely to occur.

The HUD Section 203k rehabilitation loan helps home buyers accomplish this forward-thinking, intelligent method of home buying. The 203k loan program provides financing for needed repair/rehabilitation to a home in amounts ranging from five thousand dollars ($5,000) up to the maximum allowable mortgage insurable by the FHA. Repair costs are incorporated into the purchase mortgage based upon a contractor’s estimate and HUD consultant work write-up.

The loan closes, at which time funds for repair costs are placed in an escrow account; home sellers receive their net proceeds from the home sale; home buyers receive title to their new home; and repair work begins within thirty days of closing. The buyer is now assured that all repair work outlined in the HUD consultant’s report will be completed in a workman-like manner; is being paid for without huge chunks taken from the housing expense budget; and a particular circumstance has been eliminated as a potential problem that could otherwise create mortgage repayment default. It is a controllable which could be controlled by forward-thinking home buyers.

The 203k loan program also allow for home buyers to include up to an additional twenty percent above the maximum mortgage amount to finance the installment of solar energy panels. Solar heating has been shown to reduce energy costs in residential homes. For more about energy efficiency visit the energy efficiency website.

A message to followers and supporters of this blog:

Thank you for your support. We will continue working to provide the most relevant and useful information about current FHA-insured programs and related topics. Occasionally, we’ll post content from our other sites based entirely on its value to you. Please let us know what you think in the comments section. Thanks and God Bless!


For more about 203k, please visit the HUD website. To find out if you qualify for 203k financing, visit a HUD-approved lender at

Humor or Irony?

If the government can’t run business, how come businesses always run to the government for a bailout when it runs into trouble?
FHA-insured mortgages, government run for 75 years. Lest we forget?

Recognizing the Need for 203(k) Rehabilitation Financing

What is it about the HUD Section 203(k) Rehabilitation Loan program, commonly 203k, that causes home buyers to shy away from this program as a practical and cost-effective method of financing their purchases? I have had many conversations on the subject of 203k mortgages and at least twenty percent of people I’ve spoken with didn’t want to “go through the process”.

Could it be that they are unaware of the program? Or not as familiar with it as they would like to be? Could it be that they have been dissuaded by others out of fear that it may be too complex and could cause unnecessary delays? Some real estate brokers believe that delays can lead to the loss of income, which is a well-founded belief, but knowledge of the program could easily dispel that notion. Whatever the reason for this reluctance to finance home purchases with the 203k, a closer look at the program may help allay some of those fears.

First, let’s discuss what the program is and what it is designed to do. To do this we must first briefly outline what is entailed in a regular 203b or conventional mortgage. Normally, the mortgage application process consists of four basic stages: Loan Origination, Loan Processing, Loan Underwriting, and Loan Closing. During this process borrowers are asked to meet specific, documented requirements relating to income, assets and credit. This information is combined with property data such as the property type, value, and title search in order to complete a loan package that can be approved.

The 203k mortgage program entails the same procedures above; with one addition. The borrower is asked to provide to the lender, a work estimate – prepared by a licensed and insured contractor – that must meet HUD’s minimum repair cost requirement of $5,000 for work to be completed on the property. Repairs are identified and requested by the borrower and then documented in work write-up format prepared by a HUD-approved 203k consultant. Completion of a 203k work write-up by a HUD-approved 203k consultant is required by HUD/FHA and is necessary to keep repair costs in line with HUD’s fair market prices for labor and materials.

The question therefore, is how much time is added to the processing of a 203k mortgage application because of the repair cost stage that is incorporated into the process? How much more complex has the process become because of it? Will more home buyers elect to use the program for their purchases if they become more familiar with the program? Or will they allow themselves to be dissuaded from using the program once they learn about the benefits to them in the short term as well as the long term? Let’s look at what 203k accomplishes.

There is a full list of approved repairs outlined on the HUD website, so I won’t go into the repair specifics here, but I can point out that the $5,000 minimum repair cost required for a property to qualify for the 203k rehabilitation loan can be used to close up air infiltration areas in the home and prevent the loss of heat during the winter, and cool air during the summer.

In either case those types of repairs can make a significant difference in the dollars coming out of a homeowner’s pockets to pay for energy costs. What if the property is in need of new plumbing, or electrical upgrades? The 203k pays for those repairs. Most repairs that are needed on a residential property can be financed in the 203k mortgage.

Of significant importance are the benefits home buyers can derive by using the 203k program to finance their home purchases. These benefits are: Not having to pay for expensive repairs in one lump sum, out of their own pockets, during the first year of home ownership; and if the repair of major working components during the purchase is approved, perhaps those new home owners wouldn’t need to worry about any repair expense for years after closing.

So, if you are in search of a home and you’re considering financing options, you could save this article to be used as a reminder that there is a lot to be gained and very little to lose by choosing the 203k mortgage to finance your home purchase. A little additional time taken to get the job done right, which in turn works to your benefit, can hardly be considered as losing anything. Rather, there’s everything to gain immediately after moving into your new home as well as years to come. Isn’t home ownership meant to be a pleasant and enjoyable experience?

For more on the 203k, please visit:

HUD’s website
Mortgage stories

To find HUD-approved 203k lenders, visit the following sites:

B.K.HECM Home Loan Search

A message to followers and supporters of this blog:

Thank you for your support. We will continue working to provide the most relevant and useful information about current FHA-insured programs and related topics. Occasionally, we’ll post content from our other sites based entirely on its value to you. Please let us know what you think in the comments section. Thanks and God Bless!



If the government can’t run business, how come business always run to the government for a bailout when it runs into trouble?
FHA-insured mortgages, government run for 75 years. Lest we forget?