An Explanation of FHA 203k Loans
A 203k loan takes an experienced General Contractor to help you along the way. At ShayCore we look forward to helping people with the 203k loan process. We will start with a short explanation.
Allow me to set the scenario, You find a location you would love to live in. You find the prefect lot, and on it a house. A house that has seen better days, and has not had a family in some time. A house you plan to make a home. After extended repairs and renovation this house will be perfect. Excited about the ability to renovate the property you speak to the loan officer helping you buy the home. One problem, you cannot purchase the property in the current condition. It is in to much disrepair for the bank to mortgage. This is where the FHA 203k loan comes in.
We are not in the finance business, but we would like to give you some info about the 203k loan program. If this interests you, you should speak to a loan officer familiar with the program. A 203k loan program has been around since the 70’s and helps update older properties in need of repairs. It allows for a person to receive a loan to cover the cost of a house and renovations. For example, if you find a house for $75,000 and it needs $50,000 in repairs, you can get financing of $125,000 to cover the purchase and the renovation.
Let’s get some details.
- Down payments are 3.5% of the total amount loaned.
- As the buyer, you must hire a contractor, preferably one that is familiar with 203k. www.shaycore.com For example.
- The contractor(s) bids must be approved by the lender and a 203k consultant.
- The 203k consultant will also list your desired repairs as “Required” and “Wish List”
- An appraiser must take this information and give an “After Improved Value”
- You as the buyer, along with the consultant and the appraiser, select the renovations the contractor will do.
- The purchase amount is payed to the seller, then the repair costs are set aside until you draw them to pay the contractor.
- You can add up to 6 months of mortgage payments into the repair costs.
- The last thing done is the final
The FHA 203k loan can be a great tool for the people that are looking for purchasing and upgrading a house. It can be used for upgrades on any house. There is no income limits. You can have any renovations that bring up the property value to a comparable homes in the area. Most additions are allowed including kitchen and bathroom remodels, structural additions, flooring, painting or even energy conservation changes. There are a few additions that are not allowed such as a new pool, new tennis court, or outdoor fire place. You cannot renovate for any commercial use. A 203k loan officer could provide further details. Hopefully this explains some of the detail of the FHA 203k loan.
For more information check out HUD.GOV and if you decide to look into a 203k loan please remember ShayCore as a General Contractor with experience.