Q:

What is the difference between FHA 203(k) and 203(b) loans?

A:

Quick Answer

A Federal Housing Administration, or FHA, Basic Home Mortgage Loan 203(b) is mortgage insurance for a home purchase or mortgage refinancing. FHA 203(k) insurance covers both a mortgage to purchase or refinance and additional funds to rehab the home, states the U.S. Department of Housing and Urban Development.

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Full Answer

To qualify for FHA 203(b) insurance, individuals must meet FHA credit requirements and purchase a home with one to four structures, states the U.S. Department of Housing and Urban Development. Individuals must obtain a mortgage loan from a lending company and pay a monthly premium for FHA 203(b) insurance.

FHA 203(k) insures mortgage loans that include at least $5000 in funds to rehab the home, advises the U.S. Department of Housing and Urban Development. The program allows buyers to get a single mortgage rather than obtaining a separate loan for construction and repairs.

Repairs may include reconstruction, modernization, roofing, flooring, landscaping and making the property accessible for individuals who are disabled, states the U.S. Department of Housing and Urban Development. In the event of complete reconstruction, the structures foundation must remain in place.

Both types of insurance are only available on mortgages issued by an FHA-approved lender, advises the U.S. Department of Housing and Urban Development. Individuals can search for lenders using the search option on the U.S. Department of Housing and Urban Development's website.

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