Some people are satisfied with a typical, conventional mortgage loan to finance their new home, but if they want help to afford the property and update it, then the renovation loan offered only by FHA-approved lenders is the answer they're looking for.
If home buyers aren't able to make a 20 percent downpayment on the home they want to buy, that's not a deal breaker because lenders approved by the Federal Housing Administration have the solution for them.
Among the available FHA loans, there's the reverse mortgages for seniors who want to draw some equity out of their property. But if the buyer wants to purchase a home in need of some work, then they should consider the 203(k) rehab loan.
What is a 203(k) loan?
A 203(k) loan can help cover the cost of buying a home as well as renovating the property. This kind of financing is ideal for people who want to purchase a fixer-upper.
But not all home improvements are covered by a 203(k) loan. Here's what it can include:
- Redoing the kitchen or bathroom
- Painting rooms
- Putting in new flooring
- Replacing outdated appliances
This renovation loan is great not only for people interested in financing a fixer-upper for themselves, but also for those buying a second property to rent out, because it applies to certain single-family and multi-family homes.
To decide if a 203(k) loan is a smart choice for you, contact an FHA-approved mortgage lender. This way, you can get advice from an expert who may bring up key factors you might have overlooked. For instance, you may have only considered properties that need to be completely gutted. But do you have enough funds to pay for the renovations that a 203(k) loan doesn't cover? Your mortgage lender can tell you.
If the entire mortgage-applying process is new to you, getting in touch with a mortgage loan originator from an FHA-approved lender can help you understand what exactly you need to do to qualify for this kind of loan, as well as provide information on more conventional mortgage loans. They're ready to help you.
