The FHA 203(k) loan is ideal for individuals looking to buy or refinance a home that needs some work. With this type of mortgage, you can finance the purchase price or refinance amount as well as the cost of upgrades into one loan. This lets you spread out the payments for renovations over time as you pay down the overall mortgage.
FHA 203(k) financing can be an affordable way to pay for home improvements or repairs from hurricane damage. This loan may also expand your homebuying options, especially in high-cost areas. Because 203(k) loans are insured by the Federal Housing Administration, they might offer more lenient qualification requirements than other renovation loans.
If you’re considering using an FHA 203(k) mortgage to finance home improvements or repair your home after hurricane damage, here’s what you need to know.
How does an FHA 203(k) loan work?
There are two types of FHA 203(k) loans: the limited — sometimes referred to as “streamline” — and the standard. Each of these rehab loans also has a 203(k) refinance option for current homeowners who want to improve their home’s value.
Both of these loan types have different restrictions on how much can be borrowed for renovations or repairs, and what the money can be used for. For example, improvements like a swimming pool or outdoor kitchen would generally not be eligible under these programs.
The 203(k) limited loan: gives up to $35,000 for home renovations, but it can’t be used for major structural repairs.
203(k) standard loan: gives up to $420,680 for repairs. To be eligible for this loan, renovations must cost a minimum of $5,000. Major structural repairs are also included.
203(k) eligible projects
FHA 203(k) mortgages can be used to:
- Improve a home’s functionality or attractiveness.
- Eliminate health and safety hazards.
- Rehab the plumbing or sewer systems.
- Install or repair the roof, gutters and downspouts.
- Install or replace the flooring.
- Improve major aspects of the landscaping.
- Ensure accessibility for a disabled person.
- Make a home more energy-efficient.
- And more
Improvements funded by a 203(k) loan typically must be completed by a certified contractor and gain the approval of an FHA appraiser, in some cases with HUD consultant guidance.
How do I get an FHA 203(k) loan?
In order to apply for a 203(k) loan, you will need to find an FHA-approved lender. You should also have your Social Security number ready, as well as verification of income and credit score.
Are FHA 203(k) loans a good idea?
If you’re buying a fixer-upper, or fixing up a home you already own, the FHA 203(k) mortgage may be a good option.
Pros of a 203k loan:
- Has low minimum down payment and credit score requirements.
- Offers a lower interest rate than credit cards or personal loans.
- Can cover mortgage payments if the home is uninhabitable during renovations.
Why should I call Sword Mortgage and talk to a Reverse Mortgage professional?
At Sword Mortgage, we believe that an informed customer is the best kind of customer. Therefore, our loan officers will take the time to fully explain your options and help you understand all aspects of your unique situation before making a decision. Call 770-826-0222 to speak to a mortgage professional or get started on your loan application process today.
