WHAT IS A RENOVATION AND CONSTRUCTION LOAN?
These loans are used for building a new home or for renovations on a current home. These loans cover closing costs, labor and permit fees. FHA 203k allows a loan to be taken for the renovations and the purchase of a home in a single loan versus two separate loans.
WHAT ARE THE QUALIFICATIONS?
To be qualified for a FHA 203k loan, you need to meet the following requirements:
- Provide a down payment of 3.5%
- You need a score of at least 580.
- Provide what renovations are being done (this ensures all your renovations are eligible under the FHA 203K loan)
If the above requirements are met, you are eligible to apply for a FHA 203K loan.
HOME PURCHASE WITH PLANNED IMPROVEMENTS VIA FHA 203(K) LOANS
To encourage revitalization of older neighborhoods or damaged homes, FHA provides two types of loans to help home buyers reserve a portion of loan funds to accomplish non-structural and structural repairs.
A standard 203k loan is provided for properties with structural needs.
203(k) Eligible Repairs and Improvements include:
- Repair/Replacement of roofs, gutters and downspouts
- Repair/Replacement/Upgrade of existing HVAC, plumbing, and electrical systems
- Minor remodeling, such as kitchens, which does not involve structural repairs
- Exterior and interior painting, including lead based paint stabilization or abatement
- Weatherization, including storm windows and doors, insulation, and weather stripping
- Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers, and microwaves.
- Improvements for accessibility for persons with disabilities.
- Repair, replacement or the addition of exterior decks, patios and porches.
- Basement waterproofing or remodeling which does not involve structural/sculptural repairs.
- Window and door replacement and exterior siding replacement.
- Well or septic system repair or replacement
Ineligible Repairs include:
Luxury items and improvements that do not become a permanent part of the real property are not eligible as a cost rehabilitation. Some examples include: barbecue pits; bathhouses; dumbwaiters; exterior hot tubs, saunas, spas and whirlpool baths; outdoor fireplaces or hearths; photo murals; swimming pools;
television antennas and satellite dishes; tennis courts; tree surgery. However, the homeowner can use the 203(k) program to finance such items as painting, room additions, decks, and other items, even if the home does not need any other improvements. Existing structural damage and foundation repairs.
A Limited 203(k) loan covers non-structural upgrades, such as painting, new counters, cabinets, patching holes, replacing doors, repair/installation of HVAC systems, and purchase/installation of new appliances.The maximum repair amount which can be financed using a Limited 203(k) loan is $35,000 with no minimum requirement for repairs.
Eligible properties for a 203(k) loan include:
- Attached / Detatched Single Family Residential properties
- 2-4 Unit Properties
- HUD-approved Condominiums
- Manufactured Housing
TIPS FOR RECEIVING LOANS TO RENOVATE YOUR HOME:
Before applying to receive a home renovation loan, decide as best you can regarding how much money you will need to begin your home renovation. If you hire a contractor, ask them to give you an estimate on the total cost of the home repairs. Once you have that specific number,
discuss the possibility of a home renovation loan with a mortgage broker. Different loans offer different amounts to borrowers, so talking to a mortgage broker can help determine the specific loan and amount that fits your project’s goals. For any further questions about the types of home renovation loans we offer or if you qualify for an FHA 203(k) loan, contact Lending Corner.
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