So, you’re in the market for a home. You see your dream home with 4 bedrooms, 3 bathrooms on a cul-de-sac with that gorgeous backyard deck. Picture this: you and your family having barbecues, snuggling on the couch on colder nights, and creating culinary masterpieces in the large kitchen.
But it’s not to be. Before you can turn around, someone else has snapped up that home. And the second one you love. And the third one. At some point, you may think that buying that new home is not in the cards, ever.
Do you realize that you have options? What if you crafted your very own dream home, from the inside out? You can with – with a 203K loan.
Definition: A 203K loan is a single loan that bundles your mortgage and the estimated costs of the renovations and labor all in one. The 203K loan encourages lenders to approve loans that they normally would not approve of because of the extent of the repairs the home needs.
The beauty of a 203K loan is that you no longer have to compete in The Bidding Wars! Sure, shiny and new is awfully nice, but it can also be awfully expensive. Using your 203K loan, you can get the home that you can transform into your forever home, your safe sanctuary, your dream domicile…you get the idea.
The 411 on the 203K Loan
Now it’s time for the proverbial fine print. You can’t pick just any home and say, “May I have my 203K loan please?” You and your home need to meet some requirements. Here is the basic list:
- You don’t have to be a first-time home buyer. Wait – that’s not a requirement! But it is a nice way to start this list.
- You can make structural repairs, have a $5,000 minimum up to the maximum FHA loan limit. Examples include connecting to a public water system, or adding or improving the accessibility of the home. However, an FHA 203(k) HUD consultant must assist with determining the needed repairs and costs, and perform inspections as the work progresses.
- You need at least a 3.5% down payment. This is a combo of the purchase price and the cost to renovate.
- What homes can you get? You can get a one-to-four family property that has been completed for at least a year. This includes condos and townhomes, but not co-op units. Any 3-to-4 family homes are good too, but you need at least 3 months of money in reserve, and that reserve cannot be a gift. And there’s more. If a home has been demolished but the foundation is still there, then you can get a 203K loan. Foreclosures and short sales? Include those in your list. Finally, you can convert a home, either by making a bigger one smaller or a smaller one bigger. Both ways are eligible.
For the Fixer Upper…
What happens if you want to make major repairs, but not quite as major as the standard 203K loan mentioned above? You consider a streamline FHA 203K. It allows you to get up to $30,000 for home repairs. Like the standard 203K, the streamline 203K loan covers specific types of renovations. These include:
- Making outdated kitchens and bathrooms modern
- Replacing stolen copper or other missing items
- Completing renovations that the previous owner didn’t finish
- Adding a snazzy patio or deck, and improving the landscaping
- Updating the roofing or electrical system
DIYers need not apply: That’s right – another requirement is that a licensed professional must complete your renovations – you cannot do them yourself. And to avoid issues, that professional cannot be related to you. Sorry Cousin Steve! The work must be finished within six months of the closing date of your mortgage. Your lender will track and verify the renovations during the process to make sure everything is chugging along smoothly.
Get on Track with Shamrock Home Loans
What do you do when you find the house you want but it needs a little love? You contact Shamrock Home Loans and ask about 203K loans. We can tell you about the ins and outs of the application process, get you pre-approved, and be with you on your home renovation project every step of the way. So, forget about a new build, say goodbye to bidding wars, and enjoy your home, just the way you want it.
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