Although the real estate market is on track to see continued improvements throughout 2013 when compared to the previous few years, it is still not where it was a decade ago. It is still a buyer's market out there, but a lot of the homes that are available need some work and a lot of interested homebuyers simply do not have the money set aside to make immediate repairs and renovations to a property after they purchase it. Fortunately, and FHA 203K mortgage allows buyers to purchase and renovate a property all with a single loan.
Of course, before one uses one of these types of loans to purchase or renovate a home in 2013, it's a good idea to take a closer look and come to a better understanding of the fees that go along with these loans and exactly what they can and cannot be used for in order to determine whether or not it is the right course of action to take.
First of all, since a 203K loan is designed to cover both the purchase price and the cost of renovating a property, there is a built-in contingency reserve to cover any cost overruns during the course of a renovation project. Depending on the type of renovation that is being done, the reserve will be between 10% and 20% of the estimated cost of repairs. If the project stays on budget then the reserve can be used to cover additional work or to pay down the original loan.
Although not expensive, it will be necessary for an inspection to be done by qualified appraiser in order to ensure that the project has been completed and that there are not any additional liens on the property. These types of inspections will vary somewhat when it comes to cost, but they generally range between hundred $150 and $250. The cost of a title update will be around $50.
While some individuals may be fine with spending a good portion of 2013 living in a home that is currently under some type of construction, an individual who chooses to get a Full 203K loan will have the option of financing their payments for up to six months. While this will add some additional money to the loan, it does allow person to wait until all of the repairs or renovations have been completed before they move in. Likewise, living in a home that is currently being renovated can slow down the process of completing the project, which is why many individuals choose to live elsewhere until their home is completely ready.
Interested buyers that are planning on making structural renovations to a property will need to pay engineering or architectural fees. Fortunately, these types of fees can be financed using a 203K loan. However, it is important to keep in mind that not all types of renovations can be financed using this type of loan. For example, the Streamlined 203K loan is not designed to be used for structural improvements and an individual cannot use either type of 203K loan to add luxury items to the outdoor area of their new home.
When it comes to finding the perfect home at the right price, a lot of buyers find themselves severely disappointed in just how much house they can afford. They may find the perfect house is far out of their budget while the houses that they can afford require so much work that they are not a realistic option. A 203K loan from the FHA makes it easier for homebuyers because they can make whatever changes are necessary to the home that they are interested in before they actually move in. The fact that these types of loans also require a substantially reduced down payment compared to a traditional mortgage and that they are available to individuals with lower credit scores than what most banks require also makes them a very attractive option. Buyers looking to own their dream home in 2013 can utilize these loans and finally have the home of their dreams.