There are two types of 203k loans for your existing home, or if you are buying a home that needs renovations. Regardless of which you choose, both are based on the value of the home AFTER improvements with just one loan. This is an attractive feature if you don’t have a lot of equity in your home, or the home you are purchasing doesn’t have enough immediate equity to fund renovations, as would be required with a home equity loan or second mortgage. Here are the two types of 203k loans:
The standard 203k loan is for homes in need of work that will exceed $30,000. Major repair items are typically included in these loans such as kitchens, flooring, bathrooms, plumbing, electrical, HVAC, windows, roofs, landscaping, etc. Standard 203k loans can also be used to add square footage to a home, to finish a basement, even add a new garage! There is no maximum renovations, however, the total loan amount must stay within the county loan limits for FHA loans and the renovations cannot exceed 75% of the total acquisition, the purchase price plus the renovations. Again, only 3.5% down!
203k streamline loans are designed for homes that need minimal repair. If you find a home that needs minor updates such as flooring, appliances, and other minor work, the 203k streamline is the perfect loan. The renovations on the 203k streamline cannot exceed $30,000. Best part, you only have to put 3.5% down!
If you are a realtor:
Finding the perfect home for your buyer can be challenging, especially if you are working with a first time buyer. Many homes in the lower price points will require some sort of renovation. Educate your buyers on 203k limited and 203k standard renovation loans! Most buyers don’t have an additional $30,000 + laying around for remodels. Get the money up front and move them in to their dream home.