Plenty of homes available on the market come at highly affordable rates. It comes with a catch, however: most of these bargain houses need substantial repairs before it can be considered livable once more. In most cases, having the funds for a remodel could mean the difference between a dilapidated house with good foundations and a perfect house designed to suit your specific wants and needs. This is where the FHA 203k Loan Program comes in. It can help fund your remodeling project, as well as act as a mortgage.
Below are some basic things you need to know about the program:
- You could choose between two types, the streamline 203k loan and the standard or regular 203k loan.
- You could use the loan for buying a home or refinancing your home.
- You could qualify with only 3.5% down payment.
- You could roll the repair costs into your overall loan amount.
- The house should be appraised for its value upon completion of the repairs.
- The entire loan process requires 60 days minimum to close.
- The property should be owner-occupied, meaning that you must live in it after the repairs are done.
- You could close the loan before any repairs have been completed, but you must finish all repairs within six months after closing.
- You’re allowed to make various repairs, such as reconstruction or structural modifications, aesthetic upgrades like painting and flooring, bathroom and kitchen remodeling, roofing, internal systems like your air conditioning, electrical, plumbing, water, and heating systems, buying energy efficient appliances and features, and disabled access among others.
- The loaned funds can be used for a range of remodeling and repair work. You’re not allowed, however, to use the funds to add luxury features, such as a hot tub, a swimming pool, an outdoor fireplace, or a barbecue pit among others.
Although the FHA 203k loan program isn’t right for all borrowers, it might be the right option for you if:
- You don’t have the money to make necessary repairs and updates.
- You require a strong support team to aid you in managing the entire home renovation project.
- You plan to live in the renovated home for the long haul.
- You fully understand the rewards and potential risks of going through the home remodeling process.
One caveat, however, is to make sure to select a lender that has extensive experience in providing FHA 203k loans because you would need to stay in contact with them until you close on your home. That said, if your existing lender doesn’t offer it, look for one that does.