With this loan option, you won't need to make two separate applications for a mortgage and another for renovation.
The FHA 203k loan option is only available for 1-4 unit properties. The FHA considers properties with more than four units as commercial properties and will not offer to finance such properties. You could also use this loan to complete internal repairs on eligible condominiums and townhomes.
You'll need proof that the property is your primary home to get approval for the loan. However, you might get approval for the loan if the property requires extensive repairs due to safety and living standards.
If you encounter unforeseen repairs, you are entitled to contingency funds. You can use these funds for additional repairs upon completing the other items on the bid.
Regardless of the loan offer, you may not cease the repair work for 30 consecutive days. It is always helpful to commence work within 30 days of loan closing. Also, work closely with your contractor to ensure you complete your repairs within six months of loan closing.
Diverse FHA 203k Loan Options
Different FHA 203(k) loans are ideal for your specific rehabilitation project. The available options vary based on the eligibility requirements, terms, extent of the renovation, and loan amounts.
The FHA 203k Standard Loan
Does your home need significant structural work? The FHA 203k Standard Loan offers sufficient cash for these projects. If your renovation costs exceed $35,000, do not hesitate to apply for this loan option. You'll only need to ensure that there are safety-related issues for the project.
Remember that the required renovations should not be less than $5,000. Fortunately, the FHA has not set any cap on your renovation budget. The only limit that'll apply is the FHA maximum limits, usually depending on the home's location.
Work with a HUD consultant to ease the pressure from your contractor. Also, the consultant ensures that the renovations meet minimum property standards. You can qualify for this loan with a 3.5% down payment if your credit score exceeds 580.
The FHA 203k standard loan is ideal for diverse projects that improve your home's value. You could use this loan to correct foundational issues or finish your basement or attic. Alternatively, you could knock down walls and open up your floor plan. If you're keen on preventing flooding during rough weather conditions, consider adding a retaining wall.
You could also use this standard loan to increase your kitchen's size while adding square footage to your house. If your garage space is insufficient, you could build a detached garage. Overall, this loan option ensures you complete significant renovations and corrections to your home.
Advantages of the FHA 203k Standard Loan
As mentioned, this loan option allows you to borrow as much as you need. You'll only need to remain within the FHA typical loan limits. Besides, this loan provides financing for homes that might not be habitable immediately.
The standard loan lets you finance up to six months of your loan's mortgage payments. Your lender will need verification from your HUD Consultant to ascertain that you can't stay in the house immediately. In this way, you won't have to make two housing payments at the same time.
Another advantage of this loan is that your contractor only gets paid for work they've completed. You won't make any payments in advance. You'll only make draws to the contractor as work progresses. Conduct inspections after each phase to ascertain that they've completed the agreed-upon renovations.
The FHA 203k Limited Loan
Does your new home only require cosmetic or non-structural renovations? Apply for the limited loan option that'll serve you suitably. Unlike the earlier loan option, the limited loan requires that your renovation budget remains within $35,000. Also, you can borrow as little as you need.
Besides, it is not mandatory to have a HUD Consultant. However, having one could speedily ease your renovation work and increase your home's value. Your lender will require you to provide a written work plan. With this plan, you'll easily indicate that you understand the contractor's bid.
Whether you want to replace windows, repair your septic tank, or replenish your floor, the limited loan option is ideal. You could also use these funds to replace your kitchen's and bath's countertops. Alternatively, you could add gutters and update your HVAC, electrical, and plumbing systems.
With a credit score above 580, you can qualify for this loan with a 3.5% down payment and a loan-to-value ratio of 96.5%. Compared to the standard loan option, which allows up to five draws, you can only make two draws with the limited loan option; one initial and one final draw, depending on your agreement with the contractor.
On the other hand, you can receive 50% of the repair costs during closing. However, you'll have to request this in writing before the close. Remember to provide proof of permits within 30 days of closing.
The HomeStyle Renovation Loan
If you need a conventional mortgage option for your repairs, consider the HomeStyle Renovation loan. With this loan, you'll have an easier time completing repairs permanently affixed to your property. Be sure to leverage this loan for both structural and non-structural repairs.
The HomeStyle renovation loan is suitable if you need to:
- Add new kitchen appliances
- Set up an open floor plan
- Add new carpets
- Repair your damaged wells
- Remediate lead-based paint
- Change your home's fascia to create curb appeal
- Update site amenities and landscaping
Unlike the other two loan options, which are only available for your primary home, you could use HomeStyle Renovation also to repair your secondary and investment properties.
Eligibility Guidelines for FHA 203k Loan
Like most mortgages, you must meet specific minimum requirements to qualify for an FHA 203(k) loan. The typical requirements, which resonate with your FHA loan requirements, include:
Working with an FHA-approved lender.
Have a credit score of at least 500. However, some lenders might require you to have a credit score of 620 - 640.
Pay a minimum down payment of 3.5% if your credit score is 580 and above, and a 10% down payment for credit scores between 500 and 579.
Ascertain that you will use the loan to renovate your primary residence.
- Have a front-end debt-to-income ratio below 31% and a back-end DTI below 43%.
Boost your Home's Value through Renovation
At its core, the FHA 203k loan seeks to ensure you make the most of your home. In any case, no one wants to purchase a home and fail to use it to its maximum potential. With the FHA renovation loans, you won't have to pay a premium for the previous owners' changes.
These loan options ensure that you complete home improvements that resonate with your lifestyle needs and personal tastes. Here's how you can improve your home value.
Complete Personalized Repairs
Rather than paying a premium for a recently remodeled home, you could opt for a fixer-upper available at just the right pricing. The latter option will most likely be a house with no recent renovations. With such a house, you can easily choose the most-appealing updates.
Besides, you can go on to create the interior that you always craved. In this case, you won't be settling for someone else's ideas. On the other hand, the premium home might feature renovations that don't resonate with your style and needs. While the finishes might be new, they might not represent what you would have preferred.
You might easily find yourself in a situation where you're constantly looking for funds to correct recent home renovations. Going for the FHA 203k loans ensures you get it right.
Create a Cozy Home on your Terms
Nothing is more frustrating than settling into your new home only to discover that the carpet is permanently stained or the rusty countertops. It only gets worse if you make these discoveries upon completing your down payment.
The knee-jerk reaction might be to borrow funds to update the faulty areas. In such instances, you'll end up with double payments; your initial mortgage payment and the credit card monthly payment.
On the other hand, you could opt for a Limited 203K loan ideal for cosmetic upgrades. The funds you get here can get you a new carpet and complete other less-expensive upgrades. You'll also get the chance to work with your preferred contractor, who'll strive to complete the project as soon as possible.
Ultimately, you'll only make your mortgage payment while getting what you've always wanted.
Improve the Home's Value
You don't always have to settle for a home that only meets minimum property standards. The FHA 203k loans can help you improve your home and get a higher value when you opt to sell the house. Also, you can complete renovations that'll make your stay more comfortable.
Don't shy away from adding cosmetic touches that'll make the perfect modern feel. You could set up an additional bathroom, increase your kitchen's size, and add a garage to the home. The renovation loan is also ideal for adding a pool to create an oasis in your backyard. All these renovations ensure that the house is better than you found it.
Create a home that Grows with your family
Chances are that your family was not as big as when you bought your home. With the FHA 203k loan, you can add square footage to your home to accommodate the increasing number of family members.
If you have teenage kids, they definitely would love to have their bathrooms. Consider adding a new bathroom to eliminate the need to share.
The FHA 203k Loan Application Process in Taylor County, Florida
Are you wondering how you'd apply for this handy renovation loan? Here are a couple of tips that can guide you through this process.
Scout and find a reliable loan officer who'll guide you through available loan options. Work with your loan officer to find various renovation amounts and sales prices. Use this information while shopping for your home.
Also, request a pre-approval that involves analyzing your financial situation. Including a pre-approval letter in your loan application increases your chances of getting approved.
Prepare a Repair Wish List
Begin searching for an ideal property once you get the pre-approval. Proceed to create a wish list that contains the must-have and nice-to-have repairs. The must-have repairs usually focus on the property's structure and the safety of the house's occupants.
On the other hand, you can do without the nice-to-have repairs that are not crucial to the house's occupancy.
While scouting for a home, ensure that you interview different contractors. Once you find a suitable contractor, request them to inspect the house and provide details on areas that need renovations. Ensure that the property also meets minimum property standards.
You could also work with a HUD consultant who offers a written report describing findings from your inspection.
Get Estimated Bids
Ask for an estimated bid to inform how much you can borrow for renovations. The proposal should cover a detailed description of all the upgrades you need to complete on the property. Also, indicate the cost estimates for each improvement and repair. Your lender will assess the bids and provide an appraisal once they approve the bit.
Consider working with an FHA consultant who'll complete a Maximum Mortgage Worksheet that helps you keep tabs on your financial goals. During this stage, ensure that you remain realistic about the required repairs and post-repair appraised value. Going for unrealistic estimates might leave you short of funds down the road.
Review the available appraisal before submitting the file to underwriting. Your lender will use the home's recent appraisal to calculate your maximum loan amount. Upon closing, proceed to start the renovation work, keeping in mind the six months deadline.
Consider setting up a meeting with your contractor and FHA consultant to prioritize the repairs on the property.
Additional FHA 203k Loan Information
Do you need more space? Consider applying for the renovation loan, then use the funds to update or add an accessory dwelling unit (ADU). ADUs are usually additional living areas not attached to your primary house. You could add the ADU or detach it from the primary one-unit dwelling.
Remember that the ADU is only available for one-unit dwellings. The FHA requires you to ensure that these units provide for living, cooking, bathroom facilities, and sleeping. Also, ensure that you build the ADU on the same parcel as your primary house.
Top five Desserts in Taylor County, Florida
Decadent Delights Tally - Soothe your sweet tooth with a vast array of cupcakes with excellent customer service. Consider trying the key lime cheesecake for dessert. The moist cupcakes have a perfectly balanced frosting. One taste is enough to get you and your kids hooked on the cupcakes.
Matthiessen's - Order the delicious Ice Cream and Key Lime Pie once you have your dinner. Ask the friendly servers to serve the Apple Pie Ice Cream in Waffle Cones. The monster cookies also live up to the hype and expectations. You could also try the smoothies, floats, and coffees that are readily available.
Key Largo Chocolates - Enjoy delicious ice cream in a fun atmosphere whenever you stop by this restaurant for dessert. The outdoor seating gives you the perfect relaxing spot. Request gluten-free options like the gluten-free cones if you fancy them.
Glazed Donuts - Are you looking for the perfect restaurant serving fresh donuts? The Glazed Donuts restaurant hardly disappoints. Get some freshly roasted coffee to go with the donuts. You'll also love the icings and combinations on the super fluffy donuts. Try out the apple almond fritter to ease your cravings.
- Nothing Bundt Cakes - Visit this restaurant to enjoy homemade cakes with fresh eggs, real cream cheese, and butter. Every stop guarantees a taste of decadent, melting bites. The home kitchen still offers a modern touch to its delicious cakes.
Modernize your current home with the FHA 203k loan in Taylor County, Florida
With the FHA 203k loan, you can get the most out of your current home; you won't need to purchase a new home.
Once you complete the renovations, you'll create significant value for the home. Work with an experienced contractor to ensure that you streamline the loan processes.