Are you looking to purchase a home that will need remodeling or renovations? Are you researching ways to cover the costs? A 203K Loan may just the solution you need. This week, Ransom Kelly at Assurance Financial is here to tell you all about 203K Loans. You are welcome to call our professional staff for more assistance in our Birmingham, Alabama offices.
How do 203K Loans Work?
20 K loans are one of the loan programs offered by the Federal Housing Administration (FHA). The FHA offers first-time homebuyer loans or mortgages that can be packaged together with the 203K loan. In this way, you can obtain financing both to purchase a home, and, to make needed repairs or renovations. The program allows you to combine everything into one monthly mortgage payment. With FHA loans, you can qualify for down payments as low as 3.5%. In addition, if you do not have perfect credit, you still may be able to qualify. Just note that a lower credit score may affect the rates you get for your mortgage.
What do 203K Loans Cover?
203K Loans can help cover the costs for many types of renovations. You may need upgrades of appliances, or, you may need to fully tear down and rebuild portions of the house. Either way, both may be eligible for funding from a 203K Loan. Here is a suggested list of eligible improvements:
- Modernizing or improving the functional elements of your home
- Removing hazards to health and safety
- Making structural improvements
- Installing a septic system, well, or replacing plumbing
- Adding or replacing flooring, or making improvements to flooring
- Improving the site around your home and landscaping
- Making changes to improve the accessibility of the home for someone with a disability
- Making upgrades to enhance energy efficiency
Note that for all of the above, the FHA will typically require an approved contractor to complete the work. Some exceptions can be made for do-it-yourself projects. You need to plan well and meet a tight timeline. Be sure to shop around and compare contractors thoroughly, and, ensure that they in turn create realistic cost projections.
How Do I Get A 203K Loan?
The process to obtain a 203K Loan is straightforward; however, you need to be sure you follow the FHA procedures:
Step 1: Obtain FHA Mortgage pre-approval.
Step 2: Locate a property you want to purchase, determine it meets FHA requirements, and submit an offer to the seller.
Step 3: Find an approved 203K consultant to inspect the home and develop a list of repairs and estimated costs.
Step 4: Review contractors, estimates, and submit a contract to be approved by the FHA lender.
Step 5: Obtain and submit an estimate of the value your home will be once renovations are completed.
Step 6: Follow instructions from your lender and submit requested elements for final approval.
Ransom Kelly at Assurance Financial in Birmingham, Alabama is here to help with more information, contact our offices today about your FHA Loan needs.