How to Apply for FHA 203k Home Improvement Loan
FHA 203k Rehab Loans
There are two types of FHA 203k rehab loans: a Standard 203(k) and a Full 203(k). The Standard 203k loan is used for extensive, time-consuming repairs while the Full 203k is used for major structural work and large-scale projects, such as adding an addition to the home or fixing the foundation.
One of the great features of the Standard 203k loan is that it allows for the mortgage payment to be covered for up to six months while renovations and repairs are being done. This is true even if the homeowner has to find somewhere else to live during the repair process. The Standard 203k loan is generally used for repairs that don’t total over $30,000, while the Full 203k would be for larger projects.
Applying for an FHA 203k Rehab Loan
The basic process for receiving an FHA 203k loan is as follows:
- Save for the minimum 3.5% down payment
- Find a property, which needs repairs or renovations
- Talk to a loan officer at an approved FHA lender to determine what type of 203k fits your situation
- Set up an approved work schedule with a Certified HUD Consultant
- Submit loan application
- Get an appraisal on the property, making the appraiser aware of work to be done
- Sign loan documents for final loan approval
With any home purchase, it is important to be careful and diligent in looking for a property. Remember that all FHA loans require at least a 3.5% down payment on the total loan amount, so don’t forget to factor in the cost of the repairs, additions, or renovations that will add to the home purchase price. If there’s enough room between the appraisal and your loan, you may be able to roll your closing costs into your loan along with the costs for repairs. FHA 203k loans are slightly different than a traditional FHA loan. For a 203k loan, your total loan amount can be up to 110% of your projected value once work has been done on the home.
Have questions about how to apply for an FHA 203k Home Improvement Loan? Contact a Mortgage Advisor today.