203k loans for your home remodeling project
Over the years it has become more difficult to obtain a loan for extensive remodeling. Through this loan, we have been able to get clients the money they need for the addition, bathroom remodel, kitchen remodel or whole house remodel they have been dreaming of doing. Although there are a few things that make this loan a few more steps for us, the contractors, than a conventional home mortgage, we have worked through them to make this a seamless process between you (client), your contractor, the bank and the consultant.
What is an FHA 203k loan?
The FHA 203k Renovation Loan Program provides funds for both the purchase and renovation of a home in a single mortgage loan. Once the home purchase closes, renovation funds are held on escrow to pay for certain renovation work performed by approved renovation contractors.
Buying a home that needs fixing is often a catch-up situation, because the bank won’t lend the money to buy the home until the repairs are complete, and the repairs can’t be done until the home has been purchased.
HUD’s 203(k) program can help you overcome this hurdle by allowing you to borrow funds to buy or refinance a property plus the cost of making repairs and improvements in a single mortgage. The FHA-insured 203(k) loan is provided through approved lenders nationwide and is available to self-occupying homeowners.
Down payment, credit score, loan limits and other requirements are the same as standard FHA loans. Additional guidelines specific to 203k loans are established to provide home renovation.
What are the types of FHA 203k loans for home remodeling projects?
The 203k standard is designed for more complicated projects that involve structural changes, such as room additions, exterior grading and landscaping, or renovation that would prohibit you from occupying the residence. A standard 203k is also used if your project requires engineering or architectural drawings and inspections.
The Streamlined 203k is designed for less extensive improvements and for projects not exceeding a total of $35,000 in renovation and related expenses. This version does not require the use of a consultant, architect and engineer or as many inspections as Standard 203k. As a result, when applicable, the Streamlined 203k generally becomes the simpler and less expensive option.