Buying a New Home

Part 10 - FHA Products

93. WHAT IS A 203(b) LOAN?

This is the most commonly used FHA program. It offers a low down payment, flexible qualifying guidelines, limited lender's fees, and a maximum loan amount.

94. WHAT IS A 203(k) LOAN?

This is a loan that enables the homebuyer to finance both the purchase and rehabilitation of a home through a single mortgage. A portion of the loan is used to pay off the seller's existing mortgage and the remainder is placed in an escrow account and released as rehabilitation is completed. Basic guidelines for 203(k) loans are as follows:

• The home must be at least one year old.
• The cost of rehabilitation must be at least $5,000, but the total property value-including the cost of repairs-must fall within the FHA maximum mortgage limit.
• The 203(k) loan must follow many of the 203(b) eligibility requirements.
• Talk to your lender about specific improvement, energy efficiency, and structural guidelines.

95. WHAT IS AN ENERGY EFFICIENT MORTGAGE (EEM)?

The Energy Efficient Mortgage allows a homebuyer to save future money on utility bills. This is done by financing the cost of adding energy-efficiency features to a new or existing home as part of an FHA-insured home purchase. The EEM can be used with both 203(b) and 203(k) loans. Basic guidelines for EEMs are as follows:

• The cost of improvements must be determined by a Home Energy Rating System or by an energy consultant. This cost must be less than the anticipated savings from the improvements.
• One- and two-unit new or existing homes are eligible; condos are not.
• The improvements financed may be 5% of property value or $4,000, whichever is greater. The total must fall within the FHA loan limit.

96. WHAT IS A TITLE I LOAN?

Given by a lender and insured by the FHA, a Title I loan is used to make non-luxury renovations and repairs to a home. It offers a manageable interest rate and repayment schedule. Loans are limited to between $5,000 and $20,000. If the loan amount is under $7,500, no lien is required against your home. Ask your lender for details.

97. WHAT OTHER LOAN PRODUCTS OR PROGRAMS DOES THE FHA OFFER?

The FHA also insures loans for the purchase or rehabilitation of manufactured housing, condominiums, and cooperatives. It also has special programs for urban areas, disaster victims, and members of the armed forces. Insurance for ARMs is also available from the FHA.

98. HOW CAN I OBTAIN AN FHA-INSURED LOAN?

Contact any lender such as a participating mortgage company, bank, savings and loan association, or thrift. For more information on the FHA and how you can obtain an FHA loan, visit the HUD web site at http://www.hud.gov or call a HUD-approved counseling agency at 1-800-569-4287 or TDD: 1-800-877-8339.

99. HOW CAN I CONTACT HUD?

Visit the web site at http://www.hud.gov or look in the phone book "blue pages" for a listing of the HUD office near you.