Within the past year, buying and renovating fixer-uppers has become fairly popular throughout the country. For many, purchasing the property is the most (and sometimes only) exciting step of the process, as renovations can get a bit pricey. Rather than overwhelming yourself with the costs of repairing the property’s plumbing system or updating the home’s framework, consider saving with an FHA 203k loan.
FHA 203k loans are basically government-backed loans offered to borrowers looking to purchase damaged or older homes and make repairs to fix them up. In other words, this type of renovation loan program provides the funds for both the purchase and renovation of an owner-occupied home. It consists of one loan; so once the purchase of the home is closed, renovation funds are held in escrow to pay for pre-determined renovation work done by approved renovation contractors.
There are two kinds of FHA 203k loans:
- Standard: This type of loan is offered for properties needing structural repairs, garage additions, or landscaping. The minimum amount you can borrow with this loan is $5,000.
- Limited: This second option is provided to homes requiring new roofing or appliances, non-structural repairs, or energy conservation improvements. It allows you to get a loan for the purchase price of the property, as well as up to $35,000 with no minimum repair cost.
Neither program will cover any unnecessary, or “luxury”, repairs. This means the loan will not cover pool or tennis court additions, as well as any types of improvements that are not permanent.
Although they may not cover any luxury additions, FHA 203k loans provide homebuyers with the opportunity to purchase and renovate a fixer-upper that they may not have previously been able to afford. For more information about 203k loans, or to see if this is what you need for a home purchase and renovation, contact one of our mortgage specialists today.