If you are unfamiliar with the FHA 203(k) Mortgage, have we got a treat for you! It is a great program offered by the Federal Housing Administration (FHA). With this mortgage product, you can purchase a home AND remodel or rehabilitate it all with one loan. There’s a lot of information to digest with this mortgage, so we’ll only touch on the highlights in this article. When you’re ready for more information, contact one of our loan originators today!
Benefits of an FHA 203(k) Mortgage
There are many benefits to financing your home purchase with an FHA 203(k) Mortgage. They are most notably centered around what you can DO what the loan and not necessarily the loan itself. Let’s dive in.
Finance Remodeling Costs
If you’ve ever purchased a home in need of remodeling before, you know how difficult it it can be to both purchase the home and pay for the improvements at once. Often times, you need to wait for a few years to save enough money to pay for all of the dreams you have for your new home. With the FHA 203(k) Mortgage, you can finance the cost of the home and the cost of improvements into a single loan. This allows you to have your cake and eat it, too!
Works Like an FHA Mortgage
Since the FHA 203(k) Mortgage is an FHA mortgage, many of the benefits of the loan itself are the same as those described on our FHA Mortgage page. Benefits like a low down payment and the fact that it’s easier to qualify make the 203(k) a great option for many.
Uses for an FHA 203(k) Mortgage
Remodel Your New Home
If you’ve found a great home in the perfect neighborhood, but it needs a little updating to bring it into the current century, use the FHA 203(k) Mortgage to make those updates right away.
Finance Needed Repairs
Nothing lasts forever, and the same is true for many of your home’s components. Roofs, windows, and exterior surfaces are berated by the outside elements for years and will eventually need replacing. The problem is, many of these repairs are quite costly. With the FHA 203(k) mortgage, you can finance the cost of the home and any much-needed repairs all with one low-rate loan.
Buy a Short Sale or Foreclosure
Many times short sales and foreclosures have been abandoned by their original occupants and, because of this, fall into disrepair as they sit vacant. This can be a scary prospect for a potential buyer who is unsure of the true condition of the home. A great way to mitigate this risk is by purchasing that home using an FHA 203(k) Mortgage. A thorough inspection of the home is required before purchase, so you’ll have a good idea of the items that need to be addressed during your remodeling stage.
Other FHA 203(k) Mortgage Considerations
Here is a quick down-and-dirty list of improvements and repairs you can make using your FHA 203(k) mortgage:
- Roofs, gutters and downspouts
- HVAC systems (heating, venting and air conditioning)
- Plumbing and electrical
- Minor kitchen and bath remodels
- Flooring: carpet, tile, wood, etc.
- Interior and exterior painting
- New windows and doors
- Weather stripping & insulation
- Improvements for persons with disabilities
- Energy efficient improvements
- Stabilizing or removing lead-based paint
- Decks, patios, porches
- Basement completion and waterproofing
- Septic or well systems
- Purchase of new kitchen appliances or washer / dryer
Repairs Not Permitted
Some items are not approved for use with your FHA 203(k) mortgage. They include things like:
- Landscaping or yard work
- Major remodeling
- Moving a load-bearing wall
- Room additions or add-ons to the home
- Fixing structural damage
Maximum Loan Amount
The maximum amount you can borrow on an FHA loan varies by county. Look up your county’s maximum here.