An fha 203k mortgage is really an FHA mortgage with a couple of clauses attached. Money is saved in the escrow and used to either do small or large improvements to a property. Different types of fha 203k loans are available. The first is called a streamlined 203k loan the second is termed a full 203 loan. There are a number of advantages in using both.
This fha 203k mortgage offers a lower rate of payments than others taken out from the private sector. There is a clause in it which sets aside a certain amount of money in escrow for renovating your home. Depending on the type of fha 203k you arrange for you can do large remodeling projects that will change the complete design of the house or small cosmetic changes, like remodeling the kitchen.
There are two types of fha 203k mortgage. The first is called a streamlined 203k loan. This is a fairly simple loan to get. It enables you to buy a house that needs a little fixing up. These types of houses have much lower payments than ready to go houses and can be just the thing for startup homebuyers. Unfortunately, many people do not buy these houses because they do not have the funds to fix up the house. With a streamlined fha203k loan there is money to do the cosmetic repairs. These loans are often ideal for fixer up houses.
The advantage of these loans is the fact that only one loan needs to be taken out instead of a mortgage and an equity loan, for repairs. The inspector or appraiser of the property can list everything that needs to be done in the home. A loan officer that specializes in an fha 203k mortgage will have a list of expert contractors who will do any job that the homeowner cannot do. These contractors will be familiar with the procedures of working with an fha203k loan contract.
There are certain renovations that a homeowner will not be able to do with a streamlined loan. Landscaping or anything in the yard that might need fixing cannot be done with one of these types of loans. Major remodeling of the home and fixing up structural damage cannot be done. You cannot add rooms or add-ons to the property and you will not be able to knock down walls.
For larger repairs a full fha 203k mortgage may be required. This allows you to do any repairs or renovations that you want. You can extend the house or even completely redesign it and you can do what you want for landscaping. It takes a little more paperwork than a streamlined fha 203k but is worth it to get the house that you want at a lower price. This is for homes that require a little more work than a straight fixer up home.
Other advantages of a full loan are that you can get just one loan for the home and its repairs. This means that there is less paperwork and the loan can be completed faster. Of course lower income families will be able to take advantage from these low payment loans. Neighborhoods that have a lot of foreclosed property that needs fixing will also benefit from people buying homes with fha 203k loans.
When you sign up for one of these loans you will be required to write a list of things that you will do for the house. The contractor understands that they cannot get more than 50% of the money for the job upfront and many times they will only receive the payment when the job has been completed.
An experienced loan officer who specializes in fha 203k mortgage will have a list of licensed contractors. This will make it much easier for you to get the jobs done. This type of loan does not allow for do it yourself fix ups and you must be prepared to hire a contractor. The last thing to consider is the expense of the renovations versus the cost of the fha 203k loan. The money you will save getting a fix up home should not outweigh your renovations cost.