When you are a first time home buyer, you might not have a variety of different loan options. Since most first time home buyers are young, they might not have a lot of money to spend on a house that is perfect condition or have a lot of money to renovate a home. This is where the 203k loans come in to play. The FHA 203k loan program is designed for first time home buyers who want to buy an inexpensive home that may be a formerly foreclosed home or a HUD home. Since most of these homes need significant repairs, the 203k loan program is designed to include more money in the loan than the home is worth at the time of purchase.
Types of FHA 203k Loans
The FHA loan programs usually require homes to be in certain states of repair before the loans are approved, but the 203k loans do not require any repairs to be finished for the closing on the home. There are two loan programs to choose from in the 203k program, the Streamlined or the Standard.
Streamlined Version and Allowed Renovations
The Streamlined 203k loan includes the cost of the home and up to $35,000 in renovations and repairs. This loan is meant to be completed quickly and there are some limits to the repairs and renovations that can be done. They include things like repainting the inside and outside of the house, replacing the appliances, electrical, and plumbing systems with high efficiency products, and even replacing the roof. You can also repair and replace flooring as well as windows and other necessary repairs. You can also use the money to renovate the kitchen, as long as the repairs do not involve the major structures. You can make changes to the home to make it handicap accessible.
If you need more than $35,000 worth of repairs, the 203k loan that you will need is the Standard loan. This program takes a little bit longer because you will need more estimates and inspections before the loan is approved. With the Standard program, you can repair the garage, add a room, or do other large projects. There is not much that you cannot do with the 203k Standard loan. You can even make changes to the foundation, load bearing walls, and other large projects.
List of Repairs Allowed on the Standard Loan
There are very few limitations with the Standard loan. If you do receive that mortgage, the lender will need to see the receipts and they will need to match the requests made before the loan is awarded. At least $5000 will need to be spent on actual repairs to the home, but there are many other improvements that can be made. The list includes adding a family room, bathroom, or additional bedroom. You can also remodel the kitchen and bathrooms along with adding new appliances. The basement or attic may be finished to become living spaces that meet code. You can completely replace your flooring or even build a deck, porch, or patio. Siding can be added or replaces. You can also completely upgrade or totally replace the HVAC systems in the home. If the home does not have a garage, you can add one or make one larger. The loan money can also be used to repair termite damage or repair or replace any part of the structure of the home that has been damage for any reason. The program is quite generous in its lack of requirements for repairs, remodels, replacements, and additions.
First Timers and Refinancers
Many lenders and borrowers think that the 203k is only for first time home buyers, but in actuality, you can get the loan for refinancing, too. You can also potentially get more money for your mortgage repairs if you combine the 203k with the Energy Efficient Mortgage program that is available, too.
Generous Loan Program Not to Be Overlooked
There are not any other mortgage programs that are anywhere as generous as the FHA 203k loans program. The loan provides more money than the value of the home with very little stipulation. It does not require much money down and those who wish to use the Streamlined version can get approved for the loan within minutes.