If you’re looking to purchase a home that needs renovation, an FHA 203k renovation loan might be just what you need. Homeowners can also use FHA 203k loans to make renovations on their currently owned properties. There are two different types of FHA 203k loans:
- A standard FHA 203k
- A limited or streamlined 203k
Standard FHA 203k Loans
These loans can be used for renovations and repairs costing more than $5,000 and can include structural alterations and additions to the existing home. Because FHA 203k loans are backed by the Federal Housing Administration, there are many stipulations and regulations put in place by both the FHA and HUD.
First, you’ll be issued a HUD consultant who approves one general contractor to oversee all of the home repairs. The contractor then creates an itemized bid for the labor and materials required for each step of the home repairs or renovation. The contractor gets nothing up front, but rather is reimbursed by the HUD consultant after each step of the repair process.
Because of this process, there are additional fees to the standard mortgage insurance closing costs for the HUD consultant and contractor.
Limited FHA 203k Loans
These are very similar to standard FHA 203ks. The only difference is that Limited FHA 203k loans only cover up to $35,000 of non-structural improvements and they have much-less complicated paperwork involved. Limited FHA 203k loans have very similar requirements as Standard FHA 203k loans. Borrowers may qualify with a credit score as low as 620 and with a down payment of as much as 3.5%
FHA 203k renovation loans can come in several different payment structures, depending on what you’re looking for as a homebuyer. If you are looking for a fixed rate mortgage, AmeriSouth offers 15, 20, 25, and 30-year fixed 203k loans. We also offer several options for adjustable rate 203k loans as well.
What are the Requirements?
In order to qualify for an FHA 203k renovation loan, you must have had steady employment for at least two years. Education also counts for time for employment. We also need to make sure that you haven’t had any foreclosures with the last three years or any bankruptcies within the last two years. If you have experienced any types of these credit events, further discussion with a loan officer will be necessary.
To sum it all up, 203k loans are meant for home repairs or home renovations for a purchase or a refinance. If you can qualify with a credit score of as low as 620 and with a down payment of as low as 3.5% on a home with a minimum repair cost of $5,000. To learn more about FHA 203k renovation loans, contact AmeriSouth today. We can walk you through the loan process, explain all of your options to you, and help you find the loan product that’s just right for you. Give us a call or send us an email at any time to start the conversation.