Whether refinancing your home in order to renovate it or buy a fixer-upper and use additional funds to increase value, FHA 203(k) home improvement loans are a solid option.
An FHA 203(k) Loan is backed by the federal government and it’s intended for buyers who want to buy a damaged or older house and perform their own repairs using licensed contractors. The lender for this type of home improvement loan gives potential homeowners the money to buy—or refinance—the house, along with money needed for renovations.
203(k) loans are much like a standard FHA loan, but with language specific to renovations. The major difference involves the cost estimated for your home improvement, which are held in an escrow account. As your renovation milestones are met, you can release the necessary funds to your construction crew.
Used by homeowners or home buyers that want to finance a property that needs major renovations, a standard 203(k) loan grants you the ability to acquire one loan for the cost of your mortgage, along with the required repairs.
A Standard 203(k) Loan covers up to $625,500 for the purchase price and repairs. The standard 203(k) covers major structural repairs, such as foundation repairs, fire damage and flood damage, and significant site improvements, such as room additions.Get Started On The Home Improvement Process!
When dealing with a property that is in need of modernization or repairs, homeowners often have to take out high interest home improvement loans. A streamline 203k loan allows the borrower a fixed or adjustable rate loan with straightforward terms.
A 203(k) Streamline Loan is best for when repairs come to less than $31,500, making it a better option for non-structural repairs. There will be a timeframe in which all repairs must be completed for your final appraisal, and homeowners can finance up to $35,000 into their mortgage to repair, improve, or upgrade their home.Find Out If You’re Ready To Renovate!
Homeowner or home buyers interested in utilizing the 203(k) loan option for full-scale renovations or specific updates and home improvements, should be able to present two specific requirements to their lender:
The minimum credit score required for a 203(k) loan is 580. Maintaining a healthy credit score makes life easier in general, but especially when trying to obtain a loan—so your credit score should be kept in good standing and routinely monitored.
A healthy credit score also means you could qualify for a low down payment for an FHA 203(k) loan. A lender could ask for as little as 3.5% down—but keep in mind that the more you put down, the better your terms.
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