Renovate Your Home with an FHA 203k Loan
Most home buyers are turned off at the sight or even the thought of a buying a fixer-upper, foreclosure, or an older home today. But, educated and informed home buyers are utilizing the FHA 203k loan to buy/refi and renovate homes with little or no additional out-of-pocket expenses. In fact, since 1978, the FHA 203k loan is a tool used by savvy home buyers, home owners, contractors, real estate, and mortgage professionals.
An FHA 203k loan is very similar to the traditional FHA loan. The main difference is that the FHA 203k loan allows you to include into your mortgage additional money for repairs & improvements. Traditional mortgages require the property to meet certain condition requirements before the home is purchased, but the FHA 203k loan allows you to buy the property AS-IS and complete the repairs & improvements after you own it.
The FHA 203k loan allows you to repair or improve a home without needing additional out-of-pocket money for the repairs & improvements.
The Standard 203k allows for complex rehab such as structural modifications, additions, landscaping, architectural/engineering drawings, and you can do up to $3.3Million in renovations – restrictions apply).
The Limited 203k is intended for uncomplicated and more simple rehab and will not allow for structural modifications, landscaping, etc. The maximum renovation cost for the Limited 203k is $75,000 (restrictions apply).
8 FHA 203k Benefits to Realtors® & Lenders
- Increase income by selling more homes and originating more loans
- Raise real estate values by improving homes and neighborhoods
- Decrease foreclosure inventory
- Help buyers who previously could not buy homes
- Help seller/owners with properties in outdated or fix-up condition
- Spur economic growth by creating job opportunities for the construction/remodeling industry
- Promote an under-utilized niche program that not many Realtors® or Lenders understand
- Revitalize your community
10 FHA 203k Benefits to Home Sellers
- Market property to more buyers
- Allow buyers the opportunity to renovate, upgrade or improve to suit their tastes and preferences
- No need to settle for low-ball cash offers
- Current condition of property not required to meet FHA’s property standards
- Buyer is permitted to correct any property deficiencies after close of escrow
- No more inspection concerns
- Absolutely no repairs are required prior to close of escrow
- Seller not responsible for cost of repairs/improvements
- Transaction will close with property in “AS-IS condition
- Closing occurs in 45 days
10 FHA 203k Benefits to Homebuyers
- Low down payment (3.5%)
- Renovate a home with little or no additional out-of-pocket costs
- One mortgage for purchase + renovation money
- Include mortgage payments into 203k Loan if home is uninhabitable during renovations
- Purchase offer is stronger if presented properly to seller
- Buyers have less competition to buy fixer-uppers, foreclosures or older homes that are outdated
- Better opportunities for “good deals” on home purchases
- Ability to purchase properties that may not meet FHA standards and complete the repairs/improvements AFTER the home is purchased.
- Select from a larger selection of properties for sale (in any condition), including condos, townhouses, mixed-use, multi-family, single-family dwellings and those that do not currently meet FHA standards
- When offer is presented properly to seller, 203k offers mean the seller does not have to fix-up or repair the property, but allows the buyer to include these items into their 203k mortgage and complete the improvements after closing using the buyer’s own style and design.
