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If you are thinking of buying a new home and renovating it right away or if are you interested in renovating your existing home, the FHA 203k rehab loan might be exactly what you need. Of all the types of home loans that you can take out to perform home renovations, these renovation loans are widely considered to be the most popular.
The average home renovation project can cost upwards of $50,000. It also isn't all that uncommon for some homeowners to spend even more than that while renovating kitchens, bathrooms, and other parts of a new or existing home.
Here is a guide on FHA 203k loans that will show you why a renovation loan might work well for you. Discover everything you need to know about getting a home loan from our wholesale FHA 203k loan lenders to carry out your renovations.
The FHA 203k rehab loan allows for 96.5% LTV with a minimum credit score of 580 and must be used for an owner-occupied property.
An FHA 203k rehab loan, which is not to be confused with a regular FHA loan, is a type of mortgage loan that's specifically designed to help those who would like to renovate a home that they plan to live in. You can apply for an FHA 203k loan when buying a new home or when refinancing your existing home.
When you qualify for an FHA 203k loan, it will cover the cost of a home, minus the minimum FHA down payment, and renovations that you would like to do to it. You'll then be able to pay down an FHA 203k loan over time just like you would pay down a traditional mortgage.
FHA 203k loans are insured by the Federal Housing Administration. This should put at least some people in a position to qualify for this type of loan even if they aren't necessarily able to get approved for other types of home loans. It's an excellent option for those who know they would like to take out a loan to foot the bill for home renovations.
How Does an FHA 203k Loan Work?
In order to get a better understanding of how FHA 203k loans work, you'll need to know about the two main types of FHA 203k loans that will be available to you. There are limited FHA 203k loans as well as standard FHA 203k loans. Here is what makes these two types of rehab loans different.
Limited FHA 203k Loans
If you're only going to be doing relatively minor renovations on a home that you're either buying or updating, a limited FHA 203k loan is likely going to be your best option. These types of FHA 203k loans are ideal for those who want to renovate a single room in a home or make updates to a house to bring it up to code.
Generally speaking, you'll only be able to borrow up to $35,000 when you take out a limited FHA 203k loan. Talk to your local mortgage broker to find out about your LTV and the maximum equity you qualify for. As a result, you won't be able to utilize it to make any major structural changes to a home in most cases.
Standard FHA 203k Loans
If you're going to be buying a home that needs a lot of work done to it or if you own a home that must be overhauled, a standard FHA 203k loan will be the better choice for you. This type of FHA 203k loan is perfect for anyone looking to renovate multiple rooms in a home or even carry out a full-scale demolition of a home and rebuild it on its existing foundation.
To qualify for a standard FHA 203k loan, you will need to work closely with a consultant approved by the FHA throughout your renovations. You'll also need to abide by the loan limits that the FHA has in place for your specific county.
What are the FHA 203k Loan Requirements?
If you are interested in an FHA 203k loan for a swimming pool in your backyard or installing an outdoor kitchen, you will want to consider a conventional renovation loan instead. Unfortunately, FHA 203k loan lenders will not allows certain renovations due to the design and purpose the rehab loan.
An FHA 203k loan is designed to help people carry out home renovations that are considered to be true home improvements. These renovations will help a home function better than it does now when they're finished.
Here are some of the things that you can use an FHA 203k loan for:
No matter what you plan to use an FHA 203k loan for, you should try to start the application process as soon as you can. One of the conditions that will come with taking out an FHA 203k loan is that you'll need to start making renovations to a house within 30 days of getting approved for this kind of loan. Securing a loan on the early side will make it possible for you to get right down to business.
Who Can Qualify For an FHA 203k Loan?
The good news for those interested in trying to apply for an FHA 203k loan is that the FHA requirements for qualifying are not as stringent as the requirements you'll face for other types of home improvement loans. This should give you a much better chance of getting approved for an FHA 203k loan.
Here are several of the top requirements for taking out an FHA 203k loan:
You should also have a general idea of how much money you would like to borrow when you apply for an FHA 203k loan.
As long as you're able to get approved for an FHA 203k loan, you'll be able to get access to a long list of benefits.
Take a look at a few of the biggest benefits of taking out use another phrase an FHA 203k loan:
The key will be finding a lender that can extend an FHA 203k loan to you with a low-interest rate. It'll make it easier for you to pay off an FHA 203k in the years to come.
How to Apply for an FHA 203k Loan?
When you're in the market for an FHA 203k loan, your first instinct might be to contact the FHA directly. But instead of doing this, you'll need to work with a reputable mortgage lender or local mortgage broker that has been approved by the FHA to offer FHA 203k loans.
You should consider shopping around for the right lender since some lenders will be better than others when it comes to assisting someone in your specific position. Ideally, you'll want to work with a lender that has years of experience with providing FHA 203k loans.
Once you have decided on a mortgage lender, you will want to gather some basic information to get the FHA 203k loan application process moving in the right direction. Some basic loan items are:
You should have these items handy from the moment you decide to apply for an FHA 203k loan so that you don't need to scramble to find them later.
Contact Us for More Information on FHA 203k Loans
Now that you know more about FHA 203k loans and how you can apply for one, you should look more into doing it. It might just be the best type of loan for you to use when buying a new home or renovating a house you already own.
Talk with a local mortgage loan officer at Competitive Home Lending for more FHA 203k loan information. We can provide you with a breakdown of closing costs, your monthly mortgage payment, and even process your home improvement loan in-house to make the renovation loan fast and simple.
Use a temporary rate buydown to keep your mortgage payments lower for 1, 2, or 3 years from the time of your purchase. This can help with moving costs such as furniture or lawn equipment,
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