The FHA 203k Renovation Loan allows a borrower to roll repair/renovation costs into their FHA loan. The repairs/renovation can include optional renovations/upgrades such as: interior and/or exterior paint, new flooring, kitchen/bath remodel, Energy Efficient Improvements, landscaping, etc. The process in obtaining and utilizing an FHA 203k loan can be very simple when working with the right loan officer who understands the program, and offers advantages to everyone involved in the transaction.
Advantages to Borrower
- Repair/renovation costs are rolled into the loan
- Both major and minor items are allowed
- Only 3.5% down on any FHA loan with up to 6% closing cost credit from seller allowed
- Loan amount can go up to 110% of the "after-improved value" on the appraisal
- Optional renovations/upgrades are allowed
- Customer can use a 203k consultant to help deal with contractors
- Interest on the entire loan may be tax deductible.
- Allows buyer to purchase homes that may not qualify under standard FHA guidelines
Advantages to the Seller
- Allows the home to sell to more buyers if it wouldn't qualify for a standard FHA loan
- Repairs being rolled into the loan and not requiring seller to make repairs out of pocket prior to close.
- Not having to go off and on the market due to not passing an FHA appraisal
Advantages to the Contractor
- Up to 30% available up front to purchase permits and materials
- Not having to worry about getting paid once the job is done.
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