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FHA 203k Loan in Duval County, Florida

When buying a home, you have lots of mortgage options. But that doesn't mean they all apply to you. You have to forage through the different options based on your situation to figure out which one best applies to you. For potential homeowners looking for a fixer-upper or home that is a little rough around the edges, which is the case for most homes on the market today, an FHA 203K loan is the best option.

Like other mortgage loans, an FHA 203K loan has its conditions and requirements. You should understand them to help you decide if it would be an ideal option if you're considering buying a home in Duval County, Florida, especially if the home requires some renovation and reconditioning.

What is an FHA 203K Loan?

An FHA 203k loan, sometimes also called a Rehab loan or an FHA construction loan, is a loan is a form of home financing or refinancing that enables home buyers and homeowners to combine both real estate costs and incurred renovation expenses into a single mortgage.

With an FHA 203K loan, you can buy a fixer-upper that requires repairs and significant rehabilitation efforts and roll the cost of the property and the renovation project into one home loan. There are limitations to what you can do with an FHA 203K loan. If you're considering more extravagant updates to the home, a conventional mortgage might be better suited.

How Do FHA 203K Loans Work?

FHA 203K loans are backed by Federal Housing Administration (FHA). The funds are obtained through a lab loan and take the form of a 15-30 years fixed-rate mortgage or an adjustable-rate mortgage through an FHA-approved lender.

Because the loan is government-backed, it comes with more flexible qualification terms and requirements than conventional home loans. Typically, the expenses associated with the materials and labor for the repair efforts of the home you want to buy are added to the total you elect to borrow.

You can use the loan as a cost-effective way to pay for many home improvements, substantial home improvements. As with other government-backed loans, you qualify for the loan based on your income, credit history, credit score, and debt-to-income ratio, among other factors. Remember that work covered under the FHA 203(K) loan must start within 30 days of closing, and the projects must be completed within six months.

The amount of loan you're approved for will depend on the type of FHA 203(k) loan you get, and the conditions might vary for each type of loan.

Types of FHA 203(k) Loans

There are two types of FHA 203k loans differentiated by what you can use each type of loan for;

Streamlined or Limited 203(k) loan

Limited 203(k) loans allow you to finance up to $35,000 into your mortgage for any repairs or home improvements. The lower sums borrowed simplify the application and qualification process because lenders are exposed to less risk. There is no minimum repair amount, but the loan doesn't cover major structural work.

Standard 203(k) loan

A Standard 203(k) loan is used for larger jobs and covers major structural repairs that exceed $35,000. The renovations must cost a minimum of $5,000, and a U.S Department of Housing and Urban Development consultant must be hired to oversee the project and renovation process. The renovation must follow the rules and guidelines to comply with government code.

Although standard FHA 203(k) loans cover a broader scope of renovations, you still can't use the loan to purchase or renovate any luxury item or make improvements that are not a permanent part of the property.

What Makes FHA 230(k) Loans Valuable?

The FHA 203k is a popular loan option under the FHA umbrella because of its numerous and advantageous benefits that include;

  • Low down payments – Down payment requires a substantial financial commitment that can put homes out of reach for most buyers in Duval County. With a low 3.5% down payment requirement, a 203k loan makes owning a home n Duval County easier and more practical.

  • More straightforward requirements – It's not just the flexible down payments; other requirements like income and credit score are also lower with a 203k loan. If you have a low credit score, this type of loan is lenient and allows you to get affordable loans and use them to build your credit by paying back the loan on time.

  • Claim larger tax deductions – With an FHA 203k loan, you can claim a larger tax deduction because you will claim for the renovation and the home purchase interest combined. It saves you money and allows you to put in more for the repairs.

  • Lower closing costs – A 203k has lower closing costs. Closing costs accumulate to form a large chunk of the down payments. With lower closing costs, you're paying fewer fees, giving you more money to make the down payment.

  • Keep your savings and credit – You won't have to plow through your savings and max out your credit cards to cover the repair work. The loan caters to most structural and necessary repairs.

  • One mortgage, one closing, one payment – With conventional loans, you must apply for a mortgage and another separate loan to cater to the repair costs. You also have to make two loan payments which can be hectic. Using a 203k loan saves you trouble and keeps your debt ceiling low because you only have to pay one loan.

It's easy to see why a 203k loan is a popular option among Duval Country, Florida residents. If you qualify, there are multiple benefits to opting for the loan with minimal downsides. The only significant downside with this loan is you have more paperwork to complete compared to other loans.

Requirements for Applying for an FHA 203(k) Loan in Duval County, Florida

You must achieve a set of requirements to apply for a 203k type of loan. These requirements include:

  • Credit score – FHA allows applicants to have credit scores as low as 580. However, lenders might require a score of 620-640 to qualify for the loan. This is much lower than the 720 or higher required for a conventional construction loan.

  • Minimum down payment – With an FHA loan, you only need a 3.5% down payment based on the sum of the purchase price of the property and the total project cost.

  • Income and debt requirements – Lenders, will examine your debt-to-income ratio, which compares your monthly income and debt payments. Less than 43% of your income should go toward your proposed mortgage payment and other debts.

  • Loan amount – You can borrow up to 110% of the property's proposed value using the FHA203k loan or the home price plus renovation costs, whichever is less. However, your total amount can't exceed the FHA loan limits in Duval County, Florida.

  • Occupancy – You must plan to live in the property you're buying. FHA 203k isn't the loan for you if you plan to fix and flip as an investment property.

  • Citizenship – The loan is available to U.S. citizens and lawful permanent residents. Lenders will verify citizenship status at the time of the application.

  • Mortgage Insurance - You'll be expected to carry mortgage insurance as with other loans where the down payment is often less than 20% of the property's value. Ideally, FHA 203k loans attract high mortgage insurance rates compared to standard FHA loans. The mortgage rates are 0.75% and 1% higher than standard FHA mortgages. Still, the rates are competitive and some of the lowest on the market.

If you meet all these requirements, you're set to apply for an FHA 203(k) loan. However, it doesn't have to go through a pre-qualification stage to determine if you can qualify for the loan.

Miniature people climb and repair the house

What Can You Use the FHA 203k Loan For?

Each type of 230k loan allows you to do different kinds of repairs. That's why you should seriously consider the home's condition and the nature of the repairs before settling on the type of loan you want to apply for.

Limited FHA 203k mortgage

This 203k loan allows you to do most cosmetic repair work, including bathrooms and the kitchen. It has a cost limit of $35,000 and requires a "buffer" of 15% of the total bids. The buffer is called contingency that will cover cost overruns by your contractor. If the contingency fund is unused, it's credited back to you.

Some of the acceptable repairs with a limited 203k loan include:

  • Kitchen and bathroom remodels
  • Carpet and flooring
  • Appliance replacement
  • Painting
  • HVAC replacements and upgrades
  • Repairing safety and health issues
  • Roofing replacement, including downspouts and gutters
  • Energy-efficient home improvements
  • Septic system improvements

You can't do anything structure like move load-bearing walls, add rooms, or change the home's footprint using a limited 203k loan. Ideally, it's easier to find a lender offering this type of loan than the full 203k loan.

Standard FHA 203k rehab loans

Standard 203k loans are more flexible. You can do almost anything you want to the home except non-permanent changes or adding luxury amenities. In this case, it's more practical to list things you don't do with a 203k loan:

  • You cannot do minor landscaping.

  • You can't add luxury amenities like a barbeque area, a tennis court, or a swimming pool.

  • You can't handle projects that will take longer than six months.

On the upside, you can make structural alterations, connect the property to public water or sewer, complete major landscaping projects, and even move the house to a different site.

How to Apply for an FHA 203(k) Loan in Duval County, Florida

Now that you know everything there is to know about FHA 203k loans, here's a quick guide on who you can apply for the loan. The FHA 203(k) loan works more or less the same way as regular homebuying but with some slight modifications.

The process starts with applying for the loan from a 203k-approved lender and providing the required paperwork. Once you're approved for the loan, you can then follow these steps;

  • Choose your project – Decide on the home improvements and modernizations you want to do on the house. Make sure these are qualifying repairs (more on this later). The lender will require any safety or health hazards addressed first. Mold, broken windows, derelict roofing, missing handrails, and lead-based paints are priorities. From there, you can handle the cosmetic improvements.

  • Choose your contractor – With your project list figured out, the next step is to find contractors. The contractors must be insured, licensed, and, in the business, full-time. You can't use friends who do construction on the side, and you can't do the work yourself unless you're a professional contractor.

  • Get your bids – Once you have a contractor helping you complete your loan, get official bids. The bids shouldn't be guesses and must be as accurate as possible. The lender will submit the final bids to an appraiser who builds the work's value into the property's future value, which determines your loan. Changing the bids could incur additional costs and trigger re-approval with the lender.

  • Submit everything to the lender – The lender will already have your information ready, and with the additional paperwork, the loan can go to final approval.

  • Close the loan – Sign the final mortgage documents, and the house is finally yours.

  • The contractor starts work – The contractor can start on the home improvements. Remember that FHA 230(k) loans have time limits on how soon the contractor must begin repairs and when they should complete them.

Why You Should Use Your FHA 203k Loan to Buy a Home in Duval County, Florida

Duval county is home to Jacksonville, the largest city by land area. It is also the most populous in Florida. For families looking for a vibrant neighborhood and military-friendly counties, Duval is the place to be.

If you're a sweet tooth, you'll have more reasons to buy a home in Duval because of its vibrant dessert scene. Some of the best places to treat yourself in Duval County, Florida include:

Key Lime Pie Bakery

This is a photogenic shop located a block off Duval Street. It's right on the path where most cruise ship visitors drop by. It's home to the best Key lime pie, and it comes in various forms, including whole pies, slices, pies on a stick, and dipped in chocolate. While here, you can also enjoy various other snacks while at the bakery.

It's not just the snacks; the location's experience is mind-blowing. Snap a pic on the cute green benches out in the front, and you can also pick up some of the Key Lime concentrates as a gift for the rest of the family.

The Café

You don't have to break your diet tendencies to enjoy delicious desserts. The Café is an excellent place for vegans and plant-based eaters. Whether it's the legendary Key Lime Pie in Key West, brunch, lunch, or dinner menu, you can 'Rock the Veg' while treating yourself to some of the desserts Duval has to offer vegan style.

Five other vegan cakes/pies include carrot cake and red velvet cake, and some gluten-free options. The Café is kind enough to throw in some meat options for anyone in your entourage who might not be keen on the veggie idea, making this an excellent place for family and friends.

Kermit's Key Lime Shoppe

Kermit's offers the quintessential Key Lime Pie experience in Key West without all the gluten. You will get some of the best Key Lime Pie in the Florida Keys. Kermit serves traditional Key Lime Pie with a graham cracker crust and whipped cream topping.

You can have the entire pie or by the slice. You can also find Key Lime on a stick; Key Lime Pie dipped in chocolate, and gluten-free Key Lime Pie. You should also bag a few bottles of crucial lime concentrate on your way out to try it with some of your pie recipes.

Blue Heaven

Blue Heaven is another sweet tooth's paradise. They make Key Lime Pir with a buttery graham cracker crust and the most fantastic meringue you've ever seen.

The primary attraction at this café is the 'breakfast with the rooster,' a quaint outdoor courtyard, overhanging trees, and cute signage. You also get to enjoy lovely live music while you munch your pie.

Old Town Bakery

This family-run bakery is tucked in a traditional, old-world Key West home. Along with their mouthwatering Key West Lime Pie, There's also an abundance of other pastries, artisan bread, artisanal cheeses, and sandwiches.

Apply For Your FHA 203k Loan and Enjoy the Exploits and Vibrant Community in Duval County, Florida

Duval County is the perfect place for light-spirited families looking to live in a vibrant place and appreciate the small things in life. With excellent restaurants, a fast-paced but quiet lifestyle, and an ideal ex-military community, there's no reason you shouldn't want to settle down in Duval County, Florida.

Finding a home, you can fix and transform into your dream home won't be that hard. The real estate market here is vibrant, and with an FHA 203k loan, you can live your dreams without sacrificing your savings or credit while enjoying favorable mortgage terms and requirements.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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