The FHA 203k loan was created to help home buyers get the money they need to buy and fix up a distressed home of some kind. Because there are so many on the market, the government created this program to help revitalize communities and give more people the chance at home ownership with a loan that is easier to be approved for. The funding for the cost of the home is bundled into a mortgage note with the cost of repairs, giving people all the funds that they need. Plus, the repair money is held in escrow until the work is completed by licensed professionals, so you can always trust that the job is done right.
If you know the basics of the FHA 203k already, that's helpful. If not, you can find more information about the basics of this loan, including how it works and the fact that it requires so much more paperwork to complete the application process. Some of the reasons that people choose this type of loan include:
- Because it's a bundle. The idea of being able to get a mortgage that pays for your house and the repairs that it needs is appealing to a lot of people. It saves the expense and hassle of equity loans or lines of credit.
- To get a good deal. When you find a home that's got too many problems, lenders will refuse to fund the purchase. That is, unless you use a 203k loan that is specifically designed for distressed homes. You'll be able to prove to them that you know what you're doing and they can move forward in processing your loan. Then you don't have to pay full price for a move-in ready home.
- You don't have to move in right away. If the house needs too much work, you may qualify for up to six months of mortgage payments, as well. That gives you time to live elsewhere and fix critical issues before you move in.
- Big bucks for fix-ups. It used to be that investors were the only ones who could get their hands on these distressed properties because they had the cash in hand to reduce their risk to a lender, if they even needed one. The FHA 203k loan allots up to $35,000 in repairs, with different stipulations and requirements depending on which program you choose.
- Fix it your way. When you use this loan to get a home and fix it up, you can do whatever you want. Even if things aren't necessary, they are usually covered. Luxury upgrades, like pools, hot tubs, and other high-end items aren't included in the repair allowance. Other than that, it's whatever you want.
How Do I Qualify?
Like all FHA loans, you need a minimum credit score of 620 and verifiable income that proves you can afford the investment. You will also need to get a proposal drafted of all of the repairs that need done, including estimates, to give to your lender. These will get you on the path to approval with ease. Just remember that the red tape and paperwork of this loan takes a lot longer than a mortgage because there is so much involved. If you are patient and willing to wait for a good thing, however, you can clearly see that this has the benefits that you need.
When it comes to getting the best deals, people who choose these mortgage loans definitely win every time. With a little bit of research and the help of professionals who understand these loans, you can be on your way to a great home in no time. You can even use this type of loan to refinance your existing home and fix it up, if you have that in mind. This is one of the best loan options on the market right now and it's time that it stops being such a big secret.