How an FHA 203(k) Loan Can Help You Afford Your Customized Dream Home
If you’re still in the budgeting stages of trying to figure out how much home you can afford, there may be another option to get more with your buying power so you can finance the home of your dreams.
Whether you’re purchasing a fixer-upper or you have located a home that you love that just needs an updated kitchen, an FHA 203(k) home may be for you!
Read to the end to find out how an FHA 203(k) loan can help you afford the custom home of your dreams.
WHAT IS AN FHA 203(k) LOAN AND WHY MIGHT I WANT ONE?
Generally speaking, an FHA 203(k) loan allows a home buyer to bundle the cost of renovations needed for a home purchase into their mortgage. This means the home buyer will have one just one loan and one closing without the need to seek an additional loan for home repairs and renovations.
The borrowed amount will be the price of the home plus the estimated amount of any needed repairs (including labor and materials). The down payment will be based on the full loan amount and the monthly payment will be higher since the mortgage amount is higher.
FHA 203(k) helps home buyers create the perfect home! They allow buyers to invest in a home with great potential. A buyer who can see past a home’s flaws and is able to notice where renovations or repairs could create a long-term solution are great candidates for this type of loan.
Since there are only a finite number of houses on the market in your price range, a 203(k) loan can really help you invest in a great property and customize it to meet your family’s unique needs and desires.
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WHO IS ELIGIBLE TO TAKE OUT A 203(k) LOAN?
Check with your lender on qualifications, but generally speaking, you’ll need a credit score of 640 or higher. Lenders usually look for a maximum debt-to-income ratio of 43% which will include your new mortgage payment.
The full loan amount must be at or below the maximum loan limit for FHA loans in your region. You can use this U.S. Department of Housing and Urban Development Mortgage Limits look-up tool to see the maximum loan amount in your area for single-family homes.
You’ll need to provide documentation of your income, assets, and credit profile but you’ll also need to submit a detailed proposal for the home you want to purchase and renovate including a cost estimate to prove that you’re eligible.
An appraiser will help you estimate the home’s current and potential future value based on the cost of renovations.
WHAT HAPPENS ONCE MY 203(k) LOAN IS APPROVED?
Once the loan is approved and is closed, you’ll be able to begin renovations. The funds for your renovation will be held in an escrow account and are distributed as work is completed.
The loan program requires the repairs to begin within 30 days of the loan closing and they must be completed within 6 months.
READY TO BEGIN REPAIRS AND RENOVATIONS ON YOUR NEWLY PURCHASED HOME?
The professionals at Creative Home Designs can help by looking at your existing blueprint and design. Then, we can help you modify your plans to create something that you’ll love!
Call us today for a consultation. We’ll begin by discussing your vision for your custom home remodel, then we’ll get to work creating a design and plan just for you. We can even offer a 3D Rendering of your home design to help you envision your future dream home! Due to our extensive Oklahoma network, we can connect you with trusted builders and providers who will see you through to the finish line.