For those wanting to remodel and upgrade their home but short on the funds to pay for the project, an FHA loan program that has been around for more than 20 years has been given a new lifeline by the government in the form of expanded loan limits.

The Federal Housing Administration’s 203(k) loan program was established by Congress in 1978 with the goal of revitalizing blighted urban areas and to encourage working-class professionals to invest in and improve abandoned properties. With interest rates so low and loans easy to qualify for in the early part of this decade the 203(k) loan program was little used by most borrowers. While still under-utilized by borrowers today the number of 203(k) loans originated since 2007 has more than tripled in number and shows no signs of slowing down.

Much of the reason for this stems from the fact that the US government is creating incentives to help banks unload the tremendous number of foreclosed homes they are holding on their books. As part of the American Recovery and Reinvestment Act the FHA has raised the maximum loan amount to as much as $729,750 for high-cost areas. This means that those wishing to remodel their homes may be able to borrow several hundred thousand dollars to buy and remodel their home, or to refinance their existing mortgage and remodel their home.

There are generally two types of 203(k) renovation loans where borrowers take out one loan to cover the purchase or refinance and remodeling costs. The Streamlined (k) loan is for loan amounts up to $35,000 with no minimum requirement while the Standard (k) loan is for larger loan amounts where additions or structural work is involved. For more information on the 203(k) loan requirements and to locate approved lenders in your area visit the FHA’s 203(k) web page to see if the program fits your needs. Talk to a few 203(k) lenders and ask lots of questions and you just may find that this program is just the remodeling financing package that you have been looking for.

This entry was posted on Friday, February 26th, 2010 at 5:00 am and is filed under In The News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.