FHA 203k Home Improvement Loans
The Federal Housing Administration (FHA) has created a loan program designed for borrowers who need or want to make improvements to their current home or a home they are looking to purchase. These properties often are found in foreclosure or short sale and are in poor repair. The FHA 203k Renovation Loan program is perfect for finding these often greatly discounted properties and renovating them to a liveable state. Although these loans are often associated with distressed properties, they can also be used for the minor repairs and additions to your home.
You should be prepared for a longer loan process when applying to the FHA 203k Renovation Loan program. Working directly with a bank through a foreclosure can take longer than a traditional circumstance due to the extra paperwork required. When buying from a seller instead of the bank, it is essential to make the seller aware that the loan may take longer than a traditional loan program so as to not further complicate the process.
Despite the drawback of a longer approval time, renovation loans still offer great benefits that aren’t usually available through a traditional mortgage. These can include smaller down payments, rolling the closing costs into the body of the loan, and approval for both small and large renovations.
Where traditional loans are limited by the current appraisal value for the property, an FHA 203k Renovation Loan can be higher to account for the increased value that the needed repairs and additions will add. For those buying a distressed property, this allows them to rehab the home and create extra equity without having extra cash on hand for the renovations. Another great aspect of this loan program is that borrowers may also include a contingency fund in the loan amount to account for unforeseen costs associated with renovations.
FHA 203k Renovation Loans can be for up to 110% of the estimated future value of the home. All renovations must be completed within six months of the loan’s closing date.
Whether you’re looking to remodel your current home or find a great fixer-upper, an FHA 203k Renovation Loan provides an excellent, flexible option to make your dream come true.
To see if you qualify for an FHA 2013k Renovation Loan, contact a Mortgage Advisor today.