203(k) Rehabilitation Loans
Home buyers who buy an older home or foreclosure are often frustrated by the difficulty of financing necessary repairs and renovations. However, a Federal Housing Administration (FHA) home loan program called 203(k) rehabilitation loan may offer assistance.
A 203(k) rehabilitation loan dealing with the mortgage insurance program allows borrowers to wrap the cost of repairs and improvements into their home financing. This loan option is ideal for borrowers who are interested in buying a property that needs repairs or would benefit from remodeling. It’s also ideal for homeowners who need funds to rehabilitate/remodel their property.
Which Type of 203(k) Loan Is Right for You?
Streamline 203(k): This is a loan restricted to repairs or improvements that total to $35,000 or less. It can be used for electrical and plumbing, furnace and AC, a finished basement, updated kitchens and baths, paint, carpet, floors, roofing, siding and windows.
Full 203(k): This is a loan that has FHA loan limits. It can be used for room additions, attached garages or all streamline repairs.
- These 203(k) loans require a minimum of $5,000 to be spent on rehabilitation of the home.
- The total mortgage amount, including all repair costs, must fall within the FHA mortgage limit for the homeowner’s area.
- These limits vary across the country and range from $271,050 to $729,750.
- These loans help cash-strapped homeowners who either cannot or do not want to tap in to their home equity.
- They offer an alternative to borrowers hard-pressed to find financing.
- They can help save time and money by financing the purchase or refinancing the cost of repairs.
If you are looking to purchase a home that needs renovations, repairs or are refinancing an existing mortgage and looking to make home improvements, Cliffco Mortgage Bankers, your Long Island mortgage banker, offers the Fannie Mae HomeStyle® Renovation Loan.
The great feature about this renovation loan is that it is a single first mortgage, not an equity line of credit, construction loan or second mortgage. The fact that the Fannie Mae Homestyle® Renovation Loan is a single mortgage means there is only one closing which saves both time and money. First mortgage loans typically offer a lower interest rate than an equity line or a construction loan, which is an additional cost savings.
Renovations, repairs or improvements cannot exceed 50 percent of the “as-completed” value of the property with a first mortgage. The “as-completed” value is the market value of the home factoring in the improvements and renovations. The renovation loan can only be used toward repairs or renovations that are permanently affixed to the property and also improve the value to the property.
Benefits to borrowers include the following:
- Cost-effective way to renovate or improve a home.
- Single mortgage means lower closing costs and typically a lower interest rate on a first mortgage.
- Borrowers can qualify for CLTV of up to 105 percent with eligible Community Seconds® subordinate financing.
- Loan amount based on “as-completed” value of the home or the cost basis (purchase money loans), whichever is less.
To learn more about our Home Renovation Loans, contact our Cliffco Mortgage Bankers loan specialists at (516) 408-7300 or email firstname.lastname@example.org. Each one of our licensed experts can help answer any questions you might have, guiding you every step of the way through the loan process. We look forward to hearing from you!