There are so many homes in the market today that have a lot of potentials, but have been trashed, or broken down either by neglect or by outrage by previous homeowners. Still, that doesn’t erase the fact these homes can be beautified once more. The good news is, homes like these can still be purchased, and given a new life for a new family to reside in. There is a very specific home loan that takes care that concern.
Understanding what an FHA 203K Home loan is about
An FHA 203K enables a loanee to borrow money, utilizing only a singular loan for both home rehabilitation and a home purchase. These loans can also be used entirely only for home improvements, but there might possibly be wiser options available. 203k loans, in case it hasn’t been made clear, are guaranteed by the Federal Housing Administration; which only means lending firms are faced with less risk when extending this loan. Because of that, it’s easier for debtors to get approved (especially with cheaper interest rates).
That said, you can borrow sufficient money to be able to make your purchase plus a little more money to make needed home improvements. Because the FHA is present in the equation, lending companies are willing to take many steps forward with properties they otherwise wouldn’t touch.
203k loans are best for bettering a property that you wish to reside in. At the same time, there is no free ticket to lunch, and not all benefits come easy.
An overview of the FHA 203K Guidelines
Here are the multiple perks and “non-perks” of applying for an FHA 203K loan:
FHA 203k loans can either be your most affordable option or not. You will have to pay an immediate mortgage insurance premium (MIP). On top of that, you will also need to pay a minimal but ongoing fee for every monthly payment you make. Your lending firm can also charge an origination fee (either 1.5% or $350—whatever is greater).
Fha 203k loan requirements
203K loans are infamous for documentation and paperwork. Loanees will have to fill out multiple forms, and contractors also share the same tedious fate. If you don’t have the diligence and composure to follow through on paperwork, you may want to consider options. This, however, shouldn’t be that much of a burdening challenge in the grand scheme of one’s home loan journey.
On top of having to deal with a whole lot of paperwork, loanees will also have to wait for several responses from the FHA and their lending company of choice. Technically speaking, these lenders have just as much, if not more, paperwork to comply on their end.
With 203k loans, like many other FHA loans, a loanee can pay as little as the standard 3.5% up front. At the same, it’ll always prove to be much more advantageous if one can pay a bigger down payment than expected.
If you feel like a 203k loan is too much a departure from your budget, an equally helpful option would be to apply for a non 203k FHA mortgage.