FHA 203k

For potential buyers who are looking to purchase a property that needs immediate upgrades and improvements, an FHA 203k loan provides a solution. The FHA 203k allows the buyer to borrow up to $35,000 for home improvement costs in additional to the cost for the home, and bundles all of this into one loan. Just like the traditional FHA loan, these loans are backed by the Federal Housing Administration and typically require a smaller down payment and offer a lower interest rate than traditional loans. These loans are meant to incentivize buyers who are looking to revitalize property, but don’t have immediate cash to pay for upgrades and repairs.

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Property Requirements and Criteria for Eligibility

In order to qualify for this type of loan, the property must meet specific criteria. These types of dwellings qualify for the FHA 203k loan:

  • A property that will be demolished and rebuilt (if the foundation remains)
  • Homes that must be moved to sit on a new foundation
  • Condos that are already approved for an FHA loan
  • An existing dwelling that is at least one year old
  • Homes with a maximum of four units

Extent of Rehabilitation Improvements

There are limited improvements that qualify under this loan, and the lender can determine what is stipulated. These include:

  • Remodeling a kitchen or bathroom
  • Purchasing new major appliances
  • Adding a room or second story to the structure
  • HVAC repairs and improvements
  • Enhancing disability access
  • Landscaping and site grading
  • Building or improving a patio or deck
  • Finishing a basement or attic
  • Energy conservation updates
  • Roofing and flooring maintenance and repair

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Loan Requirements

When determining whether to invest in an FHA 203k loan, you’ll need to be sure you can meet the loan requirements. The FHA 203k loan requirements are:

  • All home improvements must be completed within six months from the date of origin of the loan.
  • At least one unit of the property must serve as your primary residence.
  • You’ll need to borrow at least $5,000 (for smaller renovation projects a streamline FHA 203k allows you to borrow less).
  • The Housing and Urban Development agency (HUD) requires that certain energy efficiency requirements and structural standards are met on properties than have this loan.

Although this might seem like the perfect option not every lender offers an FHA 203k loan. So, before you start investing time and resources to research fixer-upper properties, call Signature Lending Services at 877-948-2562 to review your options.