You had always noticed that cute house a few blocks away. For some time, the owners maintained the property, but over the last while, you saw that it gradually wasn’t being kept up. The roof needed work, the windows needed to be replaced, and the garage had seen better days. But then it came up for sale, and you thought this could be your chance not just to own a house, but to own the one you have been eying for ages. The problem? How can you afford to purchase a home and make all the necessary repairs?
The answer could be an FHA 203k rehab loan.
The Federal Housing Administration (FHA) insures different types of loans. One such loan is the 203k. FHA 203k loans allow for the purchase (or refinance) AND repair of 1 – 4 family homes so that people can live in them again. FHA 203K loans not only help home owners or potential owners fix up their homes and increase their own property values, but they help give a sense of personal pride as it also revitalizes the neighborhood and helps make it more desirable, or allows it to maintain its desirability.
Sounds like a great plan! Of course, there are caveats about who is eligible for these types of loans.
FHA 203k loans are not temporary financing. The loan will be made and funds will be released at set stages until the work is complete and the final fund disbursement is made. Also:
Certain properties, and certain types of properties, are eligible for FHA 203k loans:
Adding some flowers or painting the front door are nice ways to spruce up a house, but not any old change is eligible under FHA 203k loans. The improvements must be identified by an FHA appraiser or home inspector. Here is a sampling of some repairs that are eligible:
Also, you cannot do the work yourself; the work must be completed by a qualified contractor who is unrelated to you to prevent a conflict of interest. All work must be completed within six months of the loan closing date.
Getting an FHA 203K loan can be a great thing for that special house that needs some TLC. However, before you jump into such a project, make sure you understand the qualifications, restrictions, and necessary steps to ensure that the project goes through without issue. There is a detailed process for applying for a 203K loan. Contact your local mortgage lender for exact details of what is required in case it varies by location.
Educating yourself thoroughly can make the process of turning a neglected house into a cozy home easier and stress-free.