FHA 203k Renovation Mortgages are a product that all home buyers should at least consider in their options when looking to buy a home. Not to say that the program is for everyone- because it isn’t. Like everything there are pluses and minuses to the FHA 203kprogram. So we are going to break down a few here and we will not sugar coat it. Lets tell it how it is!
- 3.5% down payment of the purchase price plus the renovation cost- that’s right! – only 3.5% down payment
- Finance up to 6 months worth of mortgage payments if the home is not habitable during construction
- Low interest rates- typically a 1/2 percent higher than a normal FHA loan but way less than a construction loan
- Roll in the renovations and purchase into one low fixed interest rate
- Loan amounts can be based off of 110% of after improved value- that’s right we are looking at what the home will be worth not what it is worth today
- Renovations can be from as simple as painting and appliances to as much as adding on a second story or putting on a large addition off the back of the home- the possibilities are endless- just no luxury items such as jacuzzi’s and pools
- FHA 203k’s are just like all FHA loans and they carry both upfront and monthly mortgage insurance
- FHA 203k related fees such as HUD inspections, title updates, etc.
- Typically we do not allow homeowners to do the projects themselves
The verdict on the FHA 203k program is that while it does carry some additional costs the loan provides some great features that make it worth a look when looking to purchase either as a first time home buyer or on your second, third or fourth home. The important thing to remember is that this program is for primary residences only. Make sure to ask your loan officer if they can explain the program and if they cannot find a lender who focuses on the FHA 203k program.
Written by Jeff Onofrio – 609-217-9409