While the idea of purchasing a fixer-upper and transforming it into a dream home may seem like a great concept, the reality can be harsh once buyers realize the true cost of a home remodel. Unfortunately, many homeowners give up on the idea of creating their dream home one renovation at a time because they automatically assume they can’t afford it. That’s where an FHA 203(k) loan comes in.
If you plan to purchase a fixer-upper or need to make improvements to your existing home, a HUD/FHA 203(k) loan may be the perfect rehab loan for you. By combining the construction funds with your home mortgage, a HUD/ FHA 203(k) loan limits your loan closing costs because it’s just one loan that provides you the necessary funds to buy a home and make the desired repairs or improvements. A HUD/FHA 203(k) loan simplifies the home renovation process. HUD/ FHA 203(k) loans are backed by the federal government, and are typically given to buyers who want to purchase a home and perform upgrades, repairs, remodel or customize to their needs and wants.
Perhaps the most important thing to know about FHA 203(k) loans is that there are actually two types: the Limited K and the “standard” Consultant K. The Limited 203(k) loan was specifically created for homes that do not have structural or foundational problems. If your home can be remodeled, repaired, or updated for less than $35,000, the Limited K may be right for you. If your home has structural damage or will require repairs in excess of $35,000, the HUD/FHA 203(k) Consultant will work with you and your contractor to give you the home of your dreams!