How Will You Fund Your Fixer-Upper?
One of the great parts of homeownership is the freedom to make changes as you deem necessary. You can literally turn any fixer upper into the home of your dreams with your creative touch in every aspect. While it's an exciting time as a homeowner, it can come with some financial stress. A remodeling project may involve lots of choices, but you have only five basic ways to pay for it: cash, credit cards, personal loans, home equity loans, or cash out refinancing.
Many loan options fall into the last category of cash out refinancing, but most require the value of your home to far exceed the amount of the loan. If you simply don’t have the equity, one little known option may be the answer—the FHA 203k. Let's take a look at details of an FHA 203k and see if it's a viable option for you!
What is an FHA 203k?
FHA's Limited 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser. Homeowners can make property repairs, improvements, or prepare their home for sale. Homebuyers can make their new home move-in ready by remodeling the kitchen, painting the interior or purchasing new carpet.
How Does it Work?
The process is like that of regular home buying, with some modifications:
Receiving a final approval involves lining up contractors and receiving bids, and some additional “hoops” to jump through. Don’t get stressed at this process, though. The 203k lender will drive the process and guide you through. You’re not on your own!
Check Out the Benefits!
Combine Purchase and Improvements - The 203k loan covers your purchase price and the cost of improvements. The proposed work must be supported by a "value upon completion" appraisal. You can save by financing renovation costs into the original mortgage rather than racking up credit card bills or dipping into reserve savings later.
Create the Perfect House - If you're having trouble finding the right house in the right location, the 203k is the perfect solution. Just take a well located home, add your own personalization and improvements, and make it "just right."
Determine Your Eligibility – As with the regular FHA program, credit requirements vary yet can be more flexible than with conventional financing. There are no income limits or first time buyer status requirements.
Minimize Out of Pocket Costs - The 203k can be obtained with as little as a 3.5% down payment. Gifts can be used, sellers can contribute toward closing or costs can be rolled into the loan amount right along with your pre-paid taxes and insurance.
Locating an FHA 203(k) Lender
Not every mortgage lender originates 203(k) loans, and not every loan officer or mortgage broker understands the product. So you’ll want to make sure that the company you work with is approved to do this loan and does a lot of them.
The streamline version of the "K" is one of the industry’s best kept secrets. Its big advantage is that it allows you to finance the cost of improvements based on your home’s projected value upon completion. Most other loans require you either to show you already have the equity or to finish the projects first.
Many loan options fall into the last category of cash out refinancing, but most require the value of your home to far exceed the amount of the loan. If you simply don’t have the equity, one little known option may be the answer—the FHA 203k. Let's take a look at details of an FHA 203k and see if it's a viable option for you!
What is an FHA 203k?
FHA's Limited 203(k) program permits homebuyers and homeowners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser. Homeowners can make property repairs, improvements, or prepare their home for sale. Homebuyers can make their new home move-in ready by remodeling the kitchen, painting the interior or purchasing new carpet.
How Does it Work?
The process is like that of regular home buying, with some modifications:
Apply → Get Approved → Find A Contractor → Get Bids → Close the loan → Complete Repairs → Move in
Receiving a final approval involves lining up contractors and receiving bids, and some additional “hoops” to jump through. Don’t get stressed at this process, though. The 203k lender will drive the process and guide you through. You’re not on your own!
Check Out the Benefits!
Combine Purchase and Improvements - The 203k loan covers your purchase price and the cost of improvements. The proposed work must be supported by a "value upon completion" appraisal. You can save by financing renovation costs into the original mortgage rather than racking up credit card bills or dipping into reserve savings later.
Create the Perfect House - If you're having trouble finding the right house in the right location, the 203k is the perfect solution. Just take a well located home, add your own personalization and improvements, and make it "just right."
Determine Your Eligibility – As with the regular FHA program, credit requirements vary yet can be more flexible than with conventional financing. There are no income limits or first time buyer status requirements.
Minimize Out of Pocket Costs - The 203k can be obtained with as little as a 3.5% down payment. Gifts can be used, sellers can contribute toward closing or costs can be rolled into the loan amount right along with your pre-paid taxes and insurance.
Locating an FHA 203(k) Lender
Not every mortgage lender originates 203(k) loans, and not every loan officer or mortgage broker understands the product. So you’ll want to make sure that the company you work with is approved to do this loan and does a lot of them.The streamline version of the "K" is one of the industry’s best kept secrets. Its big advantage is that it allows you to finance the cost of improvements based on your home’s projected value upon completion. Most other loans require you either to show you already have the equity or to finish the projects first.
So, if you're in need of funds to complete your home remodel, trust in the mortgage professionals at MHQ - Mortgage HeadQuarters to have your best interest in mind and guide you in the right direction. We can help you choose a mortgage program that's right for you and your specific needs!
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