203K Loans – How They Work For Your Home Remodel
203k Loans for your home remodeling project
Over the years it has been more difficult to get a loan for an extensive remodel. Through this loan we have been able to get clients the money they need for the addition, bathroom remodel, kitchen remodel, or whole house remodel they have been dreaming of doing. Although there are a few things that make this loan a few more steps for us contractors then a conventional house mortgage we have worked through them making this a smooth process between you(customer), your contractor, the bank, and the consultant.
What is an FHA 203k Loan?
The FHA 203k renovation loan program provides funds for both the purchase and renovation of a home packaged into one mortgage loan. Once the purchase of the home is closed, renovation funds are held in escrow to pay for per-determined renovation work done by approved renovation contractors.
The purchase of a house that needs repair is often a catch-22 situation, because the bank won’t lend the money to buy the house until the repairs are complete, and the repairs can’t be done until the house has been purchased.
HUD’s 203(k) program can help you overcome this obstacle by enabling you to borrow funds for the purchase or refinance of a property plus the cost of making the repairs and improvements in one mortgage. The FHA-insured 203(k) loan is provided through approved lenders nationwide and is available to owners who will occupy the home themselves.
Down payment, credit qualification, loan limits and other requirements are the same as standard FHA loans. Additional guidelines are set forth specific to 203k loans to provide for renovation of the home.
What are the types of FHA 203k loans for home remodeling projects?
The Standard 203k is intended for more complicated projects that involve structural changes, such as room additions, exterior grading and landscaping, or renovation that would prohibit you from occupying the residence. A Standard 203k is also used if your project requires engineering or architectural drawings and inspections.
The Streamlined 203k is designed for less extensive improvements and for projects that will not exceed a total of $35,000 in renovation and related expenses. This version does not require the use of a consultant, architect, and engineer or as many inspections as the Standard 203k. As a result, when applicable, the Streamlined 203k generally becomes the simpler, less costly option.