Homebuyers who buy an older home or foreclosure often are frustrated by the difficulty of financing necessary repairs and renovations. However, a Federal Housing Administration (FHA) home loan program 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 is also ideal for homeowners that need funds to rehabilitate/remodel their property.
Which type of 203K 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 & plumbing, furnace & A/C, finished basement, update kitchen/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.
Requires 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.
Helps for cash-strapped homeowners who either cannot or do not want to tap into their home equity.
Offers an alternative to borrowers hard-pressed to find financing.
Can help save time and money by financing the purchase or refinancing with the cost of repairs.