Have you been shopping for homes and have found one that you’re in love with but is in need of a makeover? The FHA 203K mortgage may just be the perfect method to buy a house that’s a tad rough around the edges. This particular rehabilitation mortgage has become a credible choice of loan for those wanting to buy homes to give them that second run of life.
What the 203k loan does is enable a borrower to fund the buying cost of the home on top of the fees involved in repairs, and it integrates those two elements into one loan. No more having to apply for two separate loans, just to make things work. An FHA 203k mortgage can handle all these with only one loan deal.
The Two Types of FHA 203K Loans
It’s essential to know that there are two 203k loan sub-types: the Standard 203k loan and the Streamline 203k loan. This blog post will concentrate mostly on the Streamline 203k loan due to it being the more sought-after one among buyers who just want to improve a fixer-upper. On top of that, a wider assortment of lending firms offers the aforementioned, too.
FHA 203K Loan Differences
Before diving in, there are fundamental distinctions between both 203k types: for Streamline loans, no major structural alterations are allowed and the house should be habitable all throughout the renovation process. This specific loan sub-type is also capped at $35,000. A Standard loan, on the other hand, caters to more elaborate structural work such as adding bedrooms and changing floor plans. There is no ceiling for this loan sub-type, however, the minimum amount is $5,000. This sub-type also allows for the home to be uninhabitable for a period due to renovations.
Moving forward, Streamline loans are best suited for someone who’s already eligible for an FHA grant but finds a house that isn’t eligible for FHA funding left as is. The 203k loan assists the debtor in acquiring a loan to pay for the cost of the home itself plus the fees that cover its repairs.
Allowable Streamline 203k Overhauls
As mentioned earlier, anything that doesn’t call for the home to be unliveable during its repair duration is acceptable. Other repairs include improvements for differently-abled people accessions, non-structural basement finishing, weatherization, remodeling of bathrooms and kitchens, appliance upgrades and installations, and other similar movements.
Who Are Eligible for 203K Loans?
In general, most individuals who are eligible for non-203k FHA loans can also make the cut for a 203k loan, given that the amount isn’t tremendously higher versus the homebuyer’s initial pre-approval. Lending companies and traditional banks may also charge larger interest rates and much more costly fees for this loan type. Needless to say, one should have enough savings and a passable credit score to be able to snag this deal under the FHA. Compared to an ordinary FHA loan, the 203k may demand more paperwork and can be tedious in terms of having to employ so many parties involved—contractors, FHA-authorized overseers, and so many more. Still, this is a helpful tool for many homebuyers.
For a specific computation of 203k loan rates, click the link!