Home Improvement Overview 203k Loan
Whether you're buying a home that needs to be completely renovated or simply updating certain areas, the FHA 203k loan allows you to combine your renovation costs into your mortgage so there is one loan with one closing. The amount borrowed is a combination of the cost of the home and the estimated price of the repairs, including the labor expenses. This type of loan is backed by the Federal Housing Administration, but you don't need to have an FHA home loan to qualify for a FHA 203k refinance loan.
FHA 203k Home Improvement Refinance Loan
If you need to refinance your home mortgage, the FHA 203k Refinance Loan allows current homeowners the opportunity to rehabilitate and improve their home. Whether it be making a home handicapped-accessible, replacing your roof or upgrading your kitchen, home improvement projects can raise the value of the property and allow you to customize as your needs change. The FHA 203k Refinance Loan allows you to cash out up to $35,000 for your home improvement project, and the mortgage balance can exceed the current appraised value of the home.
FHA 203k Home Improvement Loans
For many people, buying distressed or dilapidated homes can be a lucrative investment. However, home repair and renovations can be costly. With an FHA 203k Home Improvement Loan, you can have a single fixed-rate mortgage and up to $35,000 cash out for improvements.
FHA 203k Home Improvement Loan Benefits
A 203k home renovation loan is a great option for borrowers who want to finance home improvement expenses.
- Buy a fixer upper: Finance an older home that needs significant remodeling
- Get more options: Buy a home that you may not otherwise have been able to afford to repair
- By combining your construction costs with your mortgage, you limit your closing costs and simplify the renovation process.
- You can get up to $35,000 cash out and the mortgage balance can exceed the appraised value of the home
Home Improvement 203k Loan Requirements
FHA 203k loans follow the eligibility guidelines of the standard FHA mortgage, so it's best to ask a loan consultant about qualifying.
Here are some types of projects eligible for an FHA 203k Loan:
- Removal of lead-based paint
- Decks, patios, porches
- HVAC systems (heading and air conditioning)
- Basement completion
- Basement waterproofing
- Updates to a septic or well system
- New kitchen appliances
- Washer and dryer upgrades
- Roofs, gutters, and downspouts
- Plumbing and electrical upgrades
- Minor kitchen or bathroom remodeling
- Installing carpet, tile, or wood flooring
- Restoring windows or doors
- Weather stripping and insulation upgrades
- Disability improvements
- Energy efficient upgrades
- New siding
- Building a home addition
Types of properties that qualify:
- A one-to-four family home that has been complete for at least a year
- A home that has been torn down as long as some of the existing foundation still remains
- A home that may need to be moved to a new location
- Some condos
FHA 203k Loan Options
There are two types of 203k Loans:
- Streamlined 203k: The Streamlined 203k loan requires limited paperwork from the borrower for approval. It’s intended for less expensive projects that don’t involve structural improvements. It has a maximum repair limit of $35,000 and the home must be inhabitable throughout the renovation period.
- Standard 203k: The traditional 203k loan has a minimum requirement of $5000 in renovation costs and covers structural repairs. There is no maximum repair limit as long as the entire loan is below FHA’s maximum loan amount for the region.
The 203k loan is available as a fixed rate or an adjustable rate mortgage. Since there are different variables with each of these loans, it’s always a good idea to consult a 203k loan specialist regarding your specific housing situation.
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Don’t forget to ask about our I CAN mortgage, so you can customize the terms of your loan.