Remodel your home or buy a fixer-upper
If you're thinking about remodeling your home or buying one of the many foreclosures on the market, the FHA 203(k) loan program can make it happen. The basics are pretty simple:
1. Find a home in need of remodeling (could be your own!)
2. Obtain a 203(k) loan for the existing value ofthe property PLUS the cost of any repairs.
3. Have the remodeling completed by a qualified contractor and inspected by an FHA inspector.
4. Enjoy your new home with only one loan and one monthly payment!
No out-of-pocket remodeling costs, no refinances after improvements, and no high-interest credit card or 2nd mortgage payments!
How much can I borrow?
You may borrow up to 100% (sometimes even 110%) of the "after improved" appraised value. An appraiser will determine how much your home will be worth AFTER the improvements are made. This will determine the maximum amount of the loan. Here's an example:
Current mortgage amount or purchase price of new home: $200,000
Predicted value of your home after remodeling: $250,000
Amount available to perform remodeling: $250,000 - $200,000 = $50,000
Your home will have to qualify for the loan and there are a few rules to follow. For example, standard FHA loan guidelines apply. Certain luxury items such as pools, tennis courts, gazebos, etc cannot be included, but other cosmetic improvements including kitchen/bath remodeling, painting, etc are allowed.
What's the process?
Your loan officer and FHA inspector will provide guidance from pre-qualifying your home through settlement. The inspector will discuss your remodeling plans with you and provide a fair and reasonable estimate of what the work will cost. A contractor must provide a quote that is near the inspector's estimate for the loan to work. This protects you and the lender from over-inflated charges. The inspector will also perform several independent quality inspections while work is underway, further ensuring that you are getting the most for your money.
How do I get started?
Just give us a call! The 203(k) involves a whole team of individuals including the contractor, loan officer, FHA inspector, and appraiser. Luckily, one call to us will put you in touch with all of these people.
Find out how to contact us here.
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