Insured Properties means the property meets FHA 203(b) financing requirements; no obvious repairs necessary to insure an FHA loan to buyer.
Insured with Escrow Properties means the property is eligible for a 203(b) FHA loan and that necessary repairs do not exceed $5,000 and the improvements are to be completed 90 days after the closing.
Uninsured Properties means the property requires extensive repairs exceeding $5,000. These properties are eligible for an FHA 203(k) mortgage.
Appraised Value- HUD has each property appraised and sets the asking price at the appraised value. FHA will only finance 96.5% of the HUD appraised value. With one limited exception (see IE properties), on all FHA loans the difference between the offer amount and the appraised value must be paid in cash to escrow ( example 1) plus of course the 3.5% down payment. There is one exception to this rule for Insured Escrow (IE) properties. For Insured Escrow (IE) properties if the buyer is using FHA financing and the sales price exceeds the HUD appraised value, HUD will credit the buyer with the estimated MPS repair cost as listed in the listing offer
(see example 2) not to exceed $5,000. The amount bid over the asking price and exceeding the estimated Minimum Property Standard (MPS) required repairs must be paid in cash. See your FHA lender for complete details.
EXAMPLE 1: (INSURED)
FHA financing Insured (IN) property, HUD Asking price $100,000, FHA loan limit $96,500. Winning offer $105,000, buyers cash requirement $8,500 ($100K*96.5% plus $5K excess price from buyer). See your FHA lender for complete details.
EXAMPLE 2: (INSURED W/ESCROW)
FHA financing Insured With Escrow (IE), HUD Asking price $100,000, HUD estimated MPS repair cost $5,000. FHA loan limit $96,500. HUD will allow you to finance the amount designated as Repair Escrow up to $5,000 for MPS repairs. Buyers cash requirements $3,500 ($100K*96.5% plus $5K MPS designated repairs finance, so the loan amount is $101,500). Note, the repair escrow amount you may finance is limited to the amount offered in the listing under repair allowance. See your FHA lender for complete details.
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