Are you looking into purchasing a fixer-upper? While it can be a rewarding experience, it can also be stressful to figure out loans for the house as well as renovation costs. However, with the FHA 203(k) renovation loan, the entire process is made much easier!
What is a 203(k) Renovation Loan?
This loan allows you to borrow not only an amount for the purchase of your new home, but also an amount to go towards renovations you may need to make. If you find your dream home in your dream location, but the home needs some work, this is a fantastic option for you! The FHA 203(k) renovation loan is one loan with one payment for both your home and renovation costs.
How Does it Work?
The house you are looking into purchasing will be assessed to determine how much the house is worth as-is, and how much it will be worth after renovations are made. You’ll also want to bring in a contractor or builder to prepare a detailed bid for renovations. A copy of this will be given to your lender. The final loan amount you’ll receive is based off the after-improvement value of your home.
Your loan funds will go to the seller of the property while the funds that will go towards renovations will be put into an escrow account. The contractor that is working on your home will be paid by the lender from your escrow account. Once you have your loan, you are required to begin renovation work within 30 days and finish within six months.
Do I Qualify?
Does this sound like something you’d be interested in? If so, let’s see if you qualify! To qualify for the FHA 203(k) renovation loan, there are a few things you’ll need to know.
For starters, depending on the lender, you will need a credit score of at least 500 to qualify for an FHA 203(k) loan. As far as a down payment goes, the minimum amount required is 3.5% if your credit score is 580 or higher. If your credit score is lower than this, the down payment required is 10%.
If you’d like to qualify for this loan, the home you’re purchasing needs to be your primary place of residence. This loan does not go towards investment properties. There are also limitations on what types of renovations the loan can be used for. Some projects you’d be able to use your loan towards includes kitchen upgrades, plumbing and electrical upgrades, room additions, and more.
Contact Us Today!
Are you ready to learn more about the FHA 203(k) renovation loan? If so, contact Team Crescenzo today! We’d love to hear from you and help you begin your home buying journey! Call today at 843-628-4860.