FHA 203(k) RENOVATION MORTGAGE:
THERE ARE TWO PRIMARY TYPES OF FHA LOANS FOR PURCHASE OR REFINANCE: FHA 203(b) loans are the most common by far. The more rare and specialized product is, for Indiana mortgage seekers, the FHA 203(k) renovation loan. The 203(k) loan is a GREAT loan product for today's homebuying marketplace in Indiana and across the country: if you can qualify for an FHA loan, you can use the 203k. The rate for the 203k is also low, and it can be used to provide the funds to renovate a home you are purchasing or for refinancing your existing loan while making improvements.
FHA 203(k) loans have two primary types: the "streamline" 203k is a simpler form, which therefore has limitations regarding how much and what type of work can be done. The other 203k loan has no limit on how much work can be done, nor on the type of work for your Indiana home.
BOTH 203k loans allow for Energy-efficient-improvements to be added to the loan. This is useful for 203k "streamline" loans, for it allows the financing of specific energy items
A streamline FHA 203k option is also available to homeowners who are interested in doing non-structural repairs or improvements. This loan requires less documentation and can be less costly. It allows a homeowner to finance up to an additional $35,000 into his or her mortgage in order to make improvements to the home. An FHA home inspector or appraiser can identify home repairs that need to be made.
How the Loan Can Be Used
Although there are some restrictions on what the loan can be used for, there are plenty of renovations and home repairs that the loan does cover. In general, these include modernization, eliminating safety or health hazards, making a home more accessible for individuals with disabilities, or making a home more energy efficient. More specifically, the loan can be used for roofing, plumbing, flooring, painting, minor remodeling and more.
There are certain requirements with this type of financing. Homeowners must spend at least $5000 on their home repairs in order to be eligible. Homeowners must get cost estimates from a licensed and insured contractor(s) before signing the sales contract. The total cost of the mortgage, including the repairs, must remain within the FHA loan limits for the county in which the home is located.
This loan cannot be used to flip houses, and the homeowner must use the loan on the home in which he or she lives. The work being done on the house must begin within 30 days of the loan closing. All work must be completed within six months to comply with the loan requirements.
If a homeowner wants to make repairs to his or her home and needs additional financing, this type of financing could be the best option. Many of the same eligibility standards used for standard FHA home loans apply to the FHA 203k loan. Most lenders will require that the borrower have a credit score of at least 620 to be eligible. To qualify for the loan, certain energy efficiency standards, as well as certain structural standards, must be met.
This loan could be great solution for homeowners who want a better way to finance home repairs and improvements without depleting their savings