A situation you could find yourself in is getting a dream fixer-upper home only to discover most mortgage programs won’t cover the purchase since the home is currently uninsurable. In these circumstances, the FHA has a 203k program specifically designed to help you get into the property, make desired renovations, and get into the home. Through the 203k program, buyers are able to roll the costs of any home improvements into the loan to bring it up to habitable and insurable status.
Advantages of the FHA 203k Renovation Loan
- Buyers can finance the original home price, the cost of repairs, and a contingency for unexpected costs above and beyond the original repair estimates
- Upgrades such as solar panels and other energy improvements can be included in the loan amount
- Refinance options are available as well as purchases
- Up to six months of mortgage payments can be covered by the loan while renovations are being made
- The program can still be used for cash purchases through HUD to cover the cost of renovations
There are two types of FHA 203k loans available for homeowners. The first, Full FHA 203k, is for major renovations or for a complete teardown and rebuild of a home. The second, a Standard, or Streamlined 203k, is for repairs that usually don’t total more than $30,000. The second 203k program is still available for longer projects, even if they are not as costly enough to qualify for the Full 203k program.
Basic Requirements of an FHA 203k Renovation Loan
- All repairs, upgrades, and renovations must be completed within six months of the closing of the loan
- All renovation costs must be under the FHA threshold for your area (usually 110% of the projected value after renovation)
- Renovations must cost at least $5,000
- Lender and FHA monitoring of ongoing construction to ensure it adheres to regulations
- Renovations cannot have a gap in work being done of 30 days or more
- Condo renovations must get approval from the FHA
The FHA 203k Renovation loan program is a great option for those looking to create their ideal home and to possibly build up a good amount of equity in the process.
To see if you qualify for an FHA 203k Renovation Loan, contact a Mortgage Advisor today.