How to Qualify for an FHA 203k Loan?
The average home now is only on the market for 16 days before it’s quickly sold. So, when you are ready to go looking for a home you have to be ready.
Maybe you’re interested in one of those homes that aren’t selling fast. Maybe you want to buy a home that’s in need of some homeowner’s love, repairs, and renovations.
Maybe you want to buy a fixer-upper but are worried about covering the extensive renovation costs. You need an FHA 203K loan. Want to know more and how to qualify for an FHA 203k loan?
Read on to learn more including how to qualify for a 203K loan.
What Is an FHA 203K Loan?
A 203K loan is a unique type of loan guaranteed by FHA. It allows homebuyers to borrow not only to buy the house but also to borrow additional funds for renovations and repairs to the home.
So, instead of getting a mortgage and then trying to finance renovations separately or paying for them as you go, you can loop the cost of the renovations into the mortgage loan.
The repairs and the contractors doing the work need to have FHA approval. You can read about 203 loans here.
How to Qualify for an FHA 203K Loan
To qualify for a 203k loan, you must meet many of the same criteria as a regular FHA loan.
The credit score to qualify for 203k FHA loan is a minimum score of 500 if the borrower puts a 10% down payment. If the borrower has a credit score of at least 580, they can get away with as little as 3.5% of a down payment.
One thing to know about 203K loans is that sometimes the rate is slightly higher. They are a more complicated loan to get approved, so fewer lenders do them than traditional FHA loans.
Benefits of Seeking a 203K Loan
In addition to the easy qualifying for a 203k loan, there are a number of benefits to consider related to this type of financing.
You actually only have one mortgage but the funds to do the necessary repairs. In addition to borrowing for repairs, the FHA 203K mortgage allows you to borrow an additional 6 months of your mortgage payments so you can live somewhere else while doing repairs to your property.
This type of loan comes in both adjustable and fixed-rate mortgages. You can also refinance your current home if it’s in need of repairs.
What Repairs Are Eligible For 203K Loans?
When you apply for a 203K mortgage, you will also need to include a detailed plan of the work being done to the house. Some of the approved repairs include:
- New appliances
- Electrical and plumbing systems
- Replace, or add an exterior deck, patio, porch
- Basement waterproofing
- Window and door replacement and exterior siding
- Septic and well repair or replacement
- Improvements for accessibility
- Lead-based paint stabilization
It’s important to remember that whatever repairs and renovations you hope to make, you’re required to submit a detailed plan with your mortgage application.
Qualify for a 203K Loan to Get Your Homeowner Dreams Started
Now that you know how to qualify for an FHA 203k loan, will this be the right route to homeownership for you? If the idea of buying a fixer-upper excites you, then this might be the right mortgage option to make that happen.
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