The FHA 203k loan is already a mystery to a lot of people. It is rarely discussed and although it has a lot of benefits, people aren't aware that it exists in most cases. Those who do learn about it typically do so in the sense that the 203k can be used to buy a distressed property and get money for the repairs needed if it's going to be the primary residence. This is an excellent option for a lot of people and sometimes it is perceived as being so good that people actually doubt whether it's a legitimate option.
What about refinancing, though? If you have a home that you already own or have a mortgage on and it is in need of repairs, you might be able to qualify for this loan. The FHA 203k loan only requires that you need a mortgage and that you have repairs that need done. If you have those on your side, the rest should be simple. The application process and requirements for approval are similar to the traditional FHA loan, so they're not too difficult to meet and understand. There are streamline loans that can be given for up to $35,000 in non-structural repairs (cosmetic work) and there are regular loans that allow for the use of 110% of the property's value after repairs, with a limit on repairs between $5,000 and $35,000.
Why Choose the FHA 203k?
A lot of people are still uncertain about this loan and what it has to offer. After all, it's a big risk, even with the government backing it. A lot of lenders don't even offer this type of mortgage loan because they don't want to take the risk. You also have to make sure that you choose a good deal when you are buying a house with this loan. Getting in over your head or borrowing too much could backfire and defeats the purpose of getting this kind of assistance in the first place. There are a lot of benefits to an FHA 203k loan, however, if you take the time to learn about them and understand what you're getting into. Some of the benefits include:
- A chance to fix minor or major issues with your home without using credit or equity.
- Up to 110% of value, instead of 90% that is standard with most refinance loans.
- Low mortgage rates because this is backed by the government, even though it's historically a high-risk loan.
- Escrow funds for repairs make sure the job is done right and that licensed contractors are used for every job.
- A chance to reduce your interest rates, which can seriously reduce your payments and the amount of interest you pay over the 30 years of the loan.
These are just a few of the perks of using this loan for a refinancing tool. It can be very helpful to people who need a different way of doing things, or who have a "honey do" list that's a mile long. Not only can you get everything done without spending a small fortune out of pocket, but you can get it done by licensed professionals and get a lower home loan rate so that you have a better mortgage in the end.
Where Can I Learn More?
You need to make sure that you talk to someone who knows about FHA 203k loans. They should have experience in working with them and be able to help you figure out what you are getting for your money. Make sure that you tell them that you are specifically interested in a refinance loan, not buying a new home, so that you can connect with the right professionals and get accurate information. It isn't hard to get the facts about the 203k if you find a reputable consultant, lender, or other professional that understands how they work and can explain it in a consumer-friendly perspective without all the industry jargon.