Let’s say you find a home in the perfect location, at a great price… But it’s what you’d tactfully call a “fixer upper”. You love the image of it in your mind, repaired and spruced up, but the current reality isn’t so appealing. And you don’t have thousands of dollars in the bank for repairs. Do you have to pass on this great find?
Not necessarily! The FHA does offer a special loan program that is suitable for some of these situations. It’s called a FHA 203k loan, sometimes nicknamed a Rehab loan. These loans allow you to purchase that great find and fix it up, all under the umbrella of a single loan. Best of all, these loan programs are open to borrowers with “good” credit, but your score doesn’t have to be fantastic.
As you might imagine, the program does impose certain limits. The home must meet certain safety and livability standards, and the FHA won’t approve a loan on a home with certain very serious problems.
Having said that, there are plenty of situations in which the FHA 203k loan is a perfect match for both the home and the buyer. The process will involve the following steps:
- Applying with a 203k-approved lender, and getting approved for a loan (in this case, both the borrower and the house itself must be “approved”)
- Obtaining bids from contractors, to perform the necessary work
- Choosing a contractor
- Closing the loan
- Completing repairs
- Moving into your new, freshly renovated home
So, how much renovating can you do? The program limits the funds for renovation at $35,000. Acceptable projects include non-structural and non-luxury renovations, like installing an HVAC system, upgrading a kitchen or bathroom, new flooring, painting, roof replacement, and more.
For more information, contact a lender with experience in processing FHA 203k loans. And when you’re ready to choose a contractor, call us to obtain a fair and accurate bid on the repairs.