Are you a first time home buyer interested in buying a fixer-upper but don't have the funds to remodel it? There are sometimes properties on the market that weren't maintained by the sellers because of lack of funds and the house was left, or is currently in poor condition. And if you want to purchase that property and do the improvements yourself, you may qualify for financing deal through FHA 203(k) loan.
The FHA 203(k) Loan is endorsed by the federal government, designed for individuals who want to repair/renovate a damaged home so they can live in it as their primary residence. The FHA 203(k) loan lets you include the money needed for repairs and related expenses in the loan, such as materials and labor. For example, the home is priced at $150k, repairs are $15k, the home would have to be appraised for $165k. You can also add 10-15% contingency reserve for expenses above and beyond your repair estimates. You can also get up to six months' worth of mortgage payments included to cover the mortgage while you're renovating the home, so that you won't have to make a double housing payment.
And the good thing about the loan is, you only have to come up with 3.5% of the total home purchase price plus the repair costs. In the example above, you would need 3.5% of $165k or $5,775 as your down payment. Same FHA requirement applies like having a steady verifiable income and a good credit score.
There are two types of FHA 203(k) mortgages namely regular and streamlined (also called "modified"). Regular 203(k)s are for properties that need structural repairs; while streamlined are for those that need only non-structural repairs. Both can be used for purchase or refinance.
Regular 203(k) purchase loans can have a maximum mortgage amount of the property value + rehab costs or 110% of the expected value of the property after renovation. For example, if you were buying a house for $150k and the expected repair costs would be $25k, you cannot avail of the loan unless you have an existing $10k in cash to finance the repair. On the other hand, the streamlined loan allows home buyers to add a maximum of $35k to the purchase price to pay for the improvements.
The Renovation Loan is great for first time home buyers who want to buy a nice starter home and don't want to use their savings and credit cards to fix it up.
To get more information on FHA 203(k) Renovation Loan, you may visit http://www.fha-203k.com.
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