The 203(k) is an FHA loan program that enables the borrower to finance the purchase and the renovation/ rehabilitation of a home all in one loan with one closing. The 203(k) loan can also be used to refinance an existing mortgage, adding the costs to renovate or remodel that home. Eligible borrowers may finance up to 96 ½ % of the future value of the home after the renovations have been completed.
The 203(k) loan is for owner occupied properties only. The property must be the home owner's primary residence. Eligible properties include 1-4 family homes, FHA approved condos, and mixed-use properties as long as the improvements are made on the residential portion of the property.
The underwriting guidelines are the same as for other FHA loans, so they are less strict than Conventional loans allowing for lower credit scores, higher debt to income ratios, gifts and sellers concessions.
There are two types of FHA 203k mortgage loans, traditional and streamlined. The streamlined 203k is used for non-structural repairs under $35,000 such as painting and new appliances. The traditional 203k is for properties that need structural repairs such as a new roof or a room addition. Because they are more complicated in nature, traditional 203(k) loans require the use of an independent HUD 203(k) counselor. Among the other repairs/ renovations that a 203k loan will cover are the construction of a new deck or patio, bathroom and kitchen remodels, flooring, plumbing, new siding, additions to the home such as a second story, new heating and air conditioning systems, etc... The 203k will not cover luxury improvements such as adding a tennis court or pool to the property.
For more information about the 203(k) Renovation Loan, or to see if this is the right loan product for you, call us today at 888-247-5757.