Anthony J. Whitmore
(773) 517-1920
203 (K) Consultant
I.D. # A1137
(773) 517-1920
203 (K) Consultant
I.D. # A1137
What Is A 203(k) Loan
Some properties are almost perfect. The location is good and the property has potential, but you need to make a few significant improvements. Without those repairs, the home might not be suitable for living, and lenders might be unwilling to fund loans on a property with problems.
Example:
Imagine you want to purchase a $100,000 home that needs a minimum of $20,000 in upgrades and repairs to make it habitable, clean and safe. You could purchase the home and move in until you can finance the improvements separately, but you could also take out a 203(K) rehab loan that covers both the initial mortgage amount and the cash you need for repairs.
While many consumers use the 203(k) loan for purchases, also note these loans work for refinancing as well. In other words, if you already own your home but need cash for important updates and improvements, you could refinance your current mortgage with a 203(k) loan and borrow additional funds to pay for the repairs.
Some properties are almost perfect. The location is good and the property has potential, but you need to make a few significant improvements. Without those repairs, the home might not be suitable for living, and lenders might be unwilling to fund loans on a property with problems.
Example:
Imagine you want to purchase a $100,000 home that needs a minimum of $20,000 in upgrades and repairs to make it habitable, clean and safe. You could purchase the home and move in until you can finance the improvements separately, but you could also take out a 203(K) rehab loan that covers both the initial mortgage amount and the cash you need for repairs.
While many consumers use the 203(k) loan for purchases, also note these loans work for refinancing as well. In other words, if you already own your home but need cash for important updates and improvements, you could refinance your current mortgage with a 203(k) loan and borrow additional funds to pay for the repairs.
- FHA 203(k) makes it possible for you to turn that property into a home. Plus, you take that property off the market and make it a valuable part of the community again.
- The name might sound complicated, but the concept behind FHA 203(k) loans is simple: Buy or refinance a home that needs work and roll renovation costs into the mortgage.
- Because 203(k) loans are insured by the Federal Housing Administration, they may offer more lenient qualification requirements than other renovation loans.
Two Types of 203K Loans
Standard 203K Loan
A Standard 203k Loan can be used by homeowners or homebuyers who would like to finance a property that requires major renovations. With the standard 203K Loan, you have the ability to get just one loan for the cost of your mortgage, along with the required repairs. There are no limitations on the repair funds that you are able to receive, however there are limits to FHA loans.
Repair types allowed:
- Major rehabilitation and/or structural repair
- Renovations that require detailed architectural drawings
- Major landscape work and site improvements *restrictions apply
- Elimination of safety or health hazards
- New addition construction
- Site amenity improvements, such as landscaping *restrictions apply
- Repair work that will require longer than 3 months or more than 2 payments per specialized contractor
Streamline 203k Loan
A streamline 203k Loan requires less paperwork than a standard 203k Loan. You are still able to refinance your home or buy a new one, and borrow the money you need for renovations while having just one monthly payment. When obtaining a streamline refinance loan, you will get a list of recommended repairs along with a bid from a contractor. There will be a timeframe in which all repairs must be completed for your final appraisal. Homeowners can finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. Repair types allowed:
- Replace or repair existing HVAC systems
- Replace or repair roofs, including gutters and downspouts
- Replace or repair plumbing systems
- Update floor and/or flooring treatments
- Interior and/or exterior painting
- Update appliances
- Waterproof basement
- Home weatherization
- Door and/or window replacement
- Enhancing home accessibility
- Update home’s electrical wiring
- Replace/repair home’s exterior
- Make energy efficient improvements
- Installing a septic system or a well
What Kinds of Properties Qualify?
Qualifying homes for a FHA 203k Loan include:
- A one- to four-family home that has been completed for a least a year.
- A home that has been torn down, provided that some of the existing foundation is still in place.
- A home that you want to move to a new location.
- The home cannot be a co-op, but some condos are eligible.
Anthony J. Whitmore
(773) 517-1920
203 (K) Consultant
I.D. # A1137
(773) 517-1920
203 (K) Consultant
I.D. # A1137