Whether you've found a great fixer-upper or if you simply want to renovate and update your current home, you're going to need the capital to do it. Home renovations don't necessarily need to cost a fortune, but you don't want to scrimp on something this important either.
Ensuring quality work by professional contractors can mean the difference between truly enjoying your home or having to do constant repairs and maintenance. A good renovation project can also significantly increase the value of your home as well. So why not do what many other homeowners and home buyers have done, and secure a 203(k) loan?
What Is a 203(k) Home Renovation Loan?
There are a variety of loans you can apply for, but a 203(k) home renovation loan is the most practical when seeking funds for a home renovation project. Commonly used to secure capital for various types of home improvement projects, there are two types of 203(k) mortgage loans. The amount of capital you need determines which type you would apply for.
Regular FHA 203(k) loan
This loan is most commonly used for major renovation projects, such as foundation or roof work, new home additions, major repairs due to termite damage, load bearing wall work, etc. With this loan, you would be applying for funds in the range of $36,000 to $625,000. This makes sense if you are purchasing a home that also needs renovations and repairs.
Streamlined FHA 203(k) loan
This is a smaller loan for repairs or renovations that do not exceed $35,000. Typical uses for the streamlined 203(k) loan include room updates, new appliances, new flooring, new siding, etc.
Where Can You Get a Home Renovation Loan?
As this type of loan is granted by a government organization, the Federal Housing Administration (FHA), it is important that you seek out a mortgage lender that is also approved by the FHA. You will also need to be sure that you comply with FHA requirements, which include:
- Funds to cover a down payment of 3.5 percent or more
- A good credit score
- No record of bankruptcy for at least two years
- No record of foreclosure for at least three years
- The loan must be for your main residence
If you meet the above requirements, you can begin to do your research in seeking out a qualified and reputable FHA mortgage lender. When narrowing down your list of options, be sure to read reviews, as well as talk to some of the staff at each lender so you can learn more about them. You want to work with a lender you feel comfortable with. The lender should take the time to answer all your questions, and should be especially knowledgeable about FHA loans. The lender's website should also indicate if it is FHA approved, but if you cannot find any indication, simply call up and ask.
If you know anyone who has recently moved or secured a home renovation loan, ask them who they worked with and what their experience was like. Your realtor will also likely be aware of reputable FHA mortgage lenders in the area. After taking the time to research each of the best options, as well as talk with staff and see how you feel with each lender, you will be able to make an informed decision and choose the lender that is right for your home renovation loan needs.