Getting an FHA 203k Loan for a Fixer-Upper
At some point in time, everyone gets the idea to purchase a fixer-upper home and morph it into their dream home. The costs of remodeling and often is a reminder that your wallet can't take the stress. Lenders often will deny a loan to a home that requires considerable work. This is why an FHA 203k is exactly what you need.
An FHA 203k loan is backed by the federal government and given to buyers who are looking to purchase an older or run-down home with the idea of fixing it up. If you come across a home that needs a new kitchen and plumbing. An FHA 203k lender would give you the money to purchase (or refinance) the home and include money to cover the expenses of renovations.
The loan will include:
1. A 20% reserve to complete the work if it exceeds the agreed upon amount.
2. Approximately 6 months of mortgage payments to live elsewhere during remodeling
What Does It Cover?
There are 2 types of FHA 203k loans:
Standard 203k: approved for properties that need structural repairs, remodeling, a new garage or landscaping.
Limited 203k: approved for energy conservation efforts, roofing, appliances, painting.
Other repairs that an FHA 203k will cover:
making structural alterations and remodeling
replacing your roof, plumbing or HVAC system
improving accessibility for a disabled person
making energy conservation improvements
replacing floor coverings and appliances
removing or stabilizing lead-based paint
It will not cover extravagant improvements (swimming pool, wine cellar) or improvements that are not permanent additions to the home.
What Kinds of Properties Qualify?
Qualifying homes for a FHA 203k loan include:
A 1-4 family home that has been completed for 1 year
A home that has been partially torn down, with some of the foundation still in place
A home that needs to be moved to a new location
Some condominiums are eligible
Your current home that needs remodeling (as a refinance)
Your property will also have to qualify under the usual FHA requirements.
Contact Mid America Mortgage Southwest to see if your fixer-upper qualifies for an FHA 203k loan!