Mind of Money

November 25, 2017 at 1:00 am

FHA 203K Loans: Giving You a Chance to Turn a Property into Your Dream Home

Home improvementWhen looking for a new house, you will likely stumble upon a property that is almost perfect to be your dream home; the location is ideal, and the property has great potential, but you need to make several significant improvements.

Without those repairs, that home might not be suitable for living, and you might not be able to afford it as lenders rarely give out loans on a property with problems.

However, do not lose hope, as the FHA 203K loan makes it possible for you turn that property into your dream home.

What is FHA 203K Loan?

Backed by the Federal Housing Administration, the FHA 203K loan program allows you to borrow money for both home purchase and necessary home improvements. You must borrow a minimum of $5,000 but less than the certain maximum limits set by the FHA for the property’s location.

The loan interest rates will also vary, depending on your credit and current mortgage rates. You must finish your renovation project within six months; the FHA will place the funds in an escrow account and pay out your contractors as you complete the improvements.

More importantly, you can only apply for the FHA 203K loan if you are an individual or a nonprofit organization owner, not an investor.

Why Should You Apply for FHA 203K Loan?

Because the FHA 203K Loan gives you the opportunity to make significant improvements to your newly bought property, you get to do the things you want for your dream home. If you want to install energy-efficient roofs, an extra room for guests, or glass splash backs for the kitchen, you are free to do so.

Also, the loan comes with timeliness – if the contractor wants their payout, they have to complete work within six months of work start date. So, you will definitely achieve your dream home in just a matter of months.

But the major reason you should apply for this loan is that you will have the lowest interest rates you can get for home repairs, as the renovation loan is combined together with the mortgage.

The only drawback with FHA 203K loan is that you cannot use it for DIY improvements; you must hire licensed contractors for all the work. But other than that, this type of loan offers a great deal. After all, it gives you a rare chance to turn a property into your dream home.