The FHA 203k Rehab Loan May Be The Perfect Match For Your Fixer-Upper

So you find the home you think is perfect but it needs some work.  You have your pre-approval set and ready to go. You want to make an offer, but your approved FHA.  You discover the FHA loan has some restrictions for their loans that would apply to this house.  

Check out the FHA203k Rehab loan it allows you to finance 2 things

     1. Your home purchase

     2. The repairs/improvements you would like to make on the house

The trick is they are willing to loan this money because they track and verify the repairs that you are planning to do. This does mean that the loan process has some hoops to jump through to accomplish utilizing this resource. 

You do have to find a lender who is an approved 203k lender. HUD has a search page to help find one.

The next step is to get approved for the loan. The rates are a bit higher on the 203k loan about .75% to 1.0% than your regular FHA rates. You also have to pay FHA mortgage insurance. 

The repairs allowed depending on which one of two options of this type of loan you choose. 

The Limited 203k does not allow for the moving of walls (my personal favorite!) or anything that changes the footprint of the home. Kitchen and bathroom remodel, appliance replacement, Heating & Air upgrades, Flooring, Safety issues, are all allowed with this version of the 203k. Could be a huge help to just upgrade the existing home. The stated financial limit given for these upgrades is a cost of $35,000.00

So why would you choose the limited option?

More lenders offer this, so it makes it easier to find someone to work with to get approved. 

The Standard 203k FHA Loan allows you to do just about anything you want to update the home you choose. Changes have to be permanent. So structural changes are allowed in this option. You can even convert a single-family home to multiple rental units or vice versa! Another great use is to create handicap accessibility to your new home. You can even MOVE the home with this option! 

The negatives to this loan involve the longer time frame to get to closing, due to the extra time involved working with contractors to provide the lender with costs associated with the projects that need to be done! You are not able to DIY the work for this loan.  All work must be completed by a licensed and approved professional builder or contractor

If you qualify for a regular FHA loan then you should be able to receive approval for your FHA203k Loan!! Once you're approved you can find your contractor and get bids for work to be done, so that those costs can be included in your final loan amount. The renovation can start after closing, which is typically about 60 days - almost 2x the timeframe as a regular FHA loan. The lender pays the contractor as the work is completed! 

These loans do have to be applied to owner-occupied homes, for at least 12 months (so no flips or rental properties). 

If you're looking at a fixer-upper or an older home that needs some renovations. This loan could be your answer!!