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Renovate Your Home With A 203K Loan

Thinking of purchasing a home that’s in need of major repairs or renovations? There are a few perks that come with choosing a fixer upper:

  • Less purchase competition
  • More affordable way to buy in your preferred neighborhood
  • Opportunity to customize home to your needs
  • Potential to build thousands in equity

If you’re up for putting in a little extra work, planning and time, buying a home and fixing it up can be worth it! And when it comes to financing your fixer upper, consider an FHA 203k home renovation loan.

This program offers two types of loans that allow you to combine the costs of home remodeling or renovation into your mortgage for one single loan. You can use an FHA 203k rehab loan to refinance your current mortgage, or to purchase and update an older home that requires large or small upgrades.

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What is an FHA 203k loan?

An FHA 203k loan, often referred to as an FHA 203k rehab loan, is a renovation mortgage option backed by the Federal Housing Administration (FHA) that finances the purchase and/or renovation costs of a home. This means you can renovate your current home, or buy and fix up a home. Since an FHA 203k home renovation loan is backed by a government agency, borrowers can expect lower down payment requirements and lower refinancing interest rates compared to conventional renovation loans.

FHA 203k loan requirements

Since they are both backed by the FHA, the eligibility requirements for an FHA 203k loan are similar to FHA purchase loan requirements. FHA 203k loan requirements include, but may not be limited to:

  • Paying an upfront mortgage insurance premium (MIP)
  • Lower credit score and down payment requirements
  • The home’s value must fall within FHA guidelines
  • Must be used on the borrower’s primary residence
  • All renovations must be conducted by a licensed contractor

Benefits of an FHA 203k loan

The FHA 203k renovation loan offers great benefits just like a regular FHA loan. There are more flexible credit qualifications to get approved. You can borrow up to the value of the property plus the repair costs, or up to 110% of the estimated property value after the repairs are complete. For a new home purchase that requires repairs, there’s a low minimum down payment requirement of only 3.5%.

How to Purchase a Fixer Upper

With the Standard 203k you can really transform your home. It’s designed for larger projects and anything that requires structural repairs. There’s a minimum loan amount set at $5,000. You can borrow up to the value of the property plus the repair costs, or up to 110% of the estimated property value after the repairs are complete. So, what qualifies?

  • Creating more square footage, like a room addition or adding a second floor
  • Major remodeling that requires structural changes
  • Foundation repairs
  • Repairs or improvements that take over six months

Get an idea of how much home you may be able to afford with our free mortgage calculator.

How to Refinance with an FHA 203k Loan

Thinking of upgrading the home you live in and enjoying the benefits of refinancing at the same time? By consolidating the costs of home repairs into your mortgage you’ll still only have one easy monthly payment, not a separate construction loan. A free refinance calculator could give you an idea of what your payments would be after a refinance compared to your current payment.

The Streamline 203k refinance can be used for a wide variety of projects that can protect and enhance your home’s value. Everything from ordinary repairs common in older homes, to cosmetic changes that will give your home a fresh look. There’s no minimum loan amount requirement and you can make up to $35,000 in non-structural repairs like:

  • Replace or upgrade your plumbing, electrical or HVAC system
  • Insulate your home for greater energy efficiency
  • Repair or replace your roof or gutters
  • Refinish or waterproof a basement
  • Get new windows, doors or floors
  • Redesign your kitchen or bath
  • Buy new appliances
  • Add a deck

Have questions about how to get an FHA 203k home loan? A PrimeLending loan expert can help guide you through the process whether you’re purchasing a home or refinancing and making repairs on your current home. Contact us today to get started!

Product info as of 4/30/24, subject to change.

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Mandy Jordan

Mandy Jordan is a seasoned professional with over 20 years of experience in the financial services industry, including 8 years in the mortgage industry. She has a true passion for writing and marketing communications strategy, and is known for her expertise in driving business growth, building relationships, and delivering results in highly competitive markets. During her tenure at PrimeLending, Mandy has developed a deep understanding of the intricacies of the mortgage industry. Her comprehensive knowledge of loan products, underwriting guidelines, and compliance regulations has positioned her as a trusted advisor to her colleagues. As a skilled writer and marketing communications strategist, Mandy has honed her ability to craft compelling and engaging content for a variety of mediums. Her strategic approach to content creation, combined with her creativity and attention to detail, has resulted in successful marketing campaigns, thought leadership pieces, and brand messaging that resonates with target audiences. She is also proficient in leveraging social media platforms and digital marketing tools to drive brand awareness and engagement. Throughout her career, Mandy has been recognized for her exceptional communication skills, ability to work in cross-functional teams, and her unwavering commitment to delivering exceptional customer service. She has a track record of building and maintaining strong relationships with clients, partners, and stakeholders, and is often sought after for her strategic advice and guidance. Mandy holds a Bachelor's degree in English from Southern Methodist University, and a Master’s in Business Administration with a focus on Marketing from The University of Texas at Austin. In her free time, Mandy enjoys writing creatively, reading, and volunteering for local non-profit organizations. As a dynamic professional with a unique blend of experience in the mortgage industry, financial services, and marketing communications, Mandy Jordan continues to make significant contributions to the industry and is well-respected for her expertise, leadership, and unwavering commitment to excellence. Her warm demeanor, coupled with her wealth of experience and expertise, make her a trusted professional in her field.

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