Many of the homes listed for sale are foreclosures and need some work. If you are looking at a home that needs repairs or if you want to remodel your home, a FHA 203K loan may work for you. It is a mortgage that allows you to buy a home (or refinance) and make repairs as part of the mortgage.
There is a streamline version of this loan that allows for repairs up to about $35,000 including some of the loan costs. You can not do any structural changes to the home, but you could replace the roof or windows, update the furnace and plumbing, replace siding, carpet and paint.
The full 203K allows for large and small dollar projects including room additions and garages. If it affects the frame or structure of the home, it must be a full 203K. The full 203K requires the use of a HUD consultant so there is an additional fee of up to $1000.
If you are thinking about doing a rehab loan, you will need bids from licensed contractors. Once the bids are in, we can determine whether it is a streamline or full 203K and what your loan amount will be. The appraisal is based on the final improved value. The work must be done by licensed contractors, so you can not do the work yourself unless you are a licensed contractor. The work must begin within 30 days of closing and must be completed within 6 months of closing. You need to allow for extra time between writing your purchase agreement and closing to allow for the contractor's bids.
For some of the homes that are listed and need repairs, this is a terrific way to purchase a home and get the repairs done at the same time. If you currently own your home and want to do some repairs or remodeling, this may be a way to get the repairs done and put the cost into the mortgage.