The FHA 203k is a renovation loan program that provides funds for both the purchase and renovation of a home. There are two types of an FHA 203k loan. The first is normal 203k, which is given for properties that need structural repairs such as a new roof or a room addition. The second is the streamlined 203k, which is given for non-structural repairs such as painting and new appliances.
FHA 203K home loans provide the opportunity to snap up a bargain home and then renovate it to your taste. Or better still, you have a kitchen that requires remodeling and want to replace those outdated appliances, these kinds of mortgage loans would be appropriate to meet your financial needs.
This loan is officially known as Federal Housing Administration’s 203k Rehabilitation Mortgage Insurance Program, which puts together renovation and purchase or renovating and refinancing costs all in one mortgage.
Benefits of an FHA 203k Loan
Some prospective buyers in Seattle, Bellevue, Issaquah and Washington state would rather stay away from homes needing renovation because the cash needed for a new roof or new flooring plus the loan closing costs, the down payment and the cost of moving expenses are not readily available. With a mortgage loan of this nature, you can extend your payments for the renovation over the life of the loan instead of paying a lump sum.
This is how FHA 203k loan can be of great help: You can opt to refinance your existing mortgage and then add the cash needed for your home renovation project into the loan balance. With this option, you’ll be able to make a decision whether to remodel or move.
How do you Become Eligible for a 203k Loan?
To become eligible for 203k loan, you will have to meet the same requirements just as other FHA loan.
- You must have at least 620 credit score, depending on the lender.
- Your debt-to-income ratio can only be in the range of 45% – 55%
- You require a down payment of 3.5% or more for purchase, or in the case of refinancing, 85% loan to value.
- The loan amount must be less than the maximum loan limit for your area, including purchase and renovation costs.
- You must be the owner of the building you want to renovate and be an occupant at the same time.
When you compare to a traditional FHA mortgage, the biggest difference in qualifying for FHA 203k is the fact that qualification is based on costs of your renovation, including the purchase price of the home.
Cascade Equity Group, Inc. is always on hand to help you if an FHA 203k loan is included in your home acquisition plan. Talk to one of our representatives today and we will be able to help you as regards your financial obligation towards achieving your dream home.