There are mortgages available specifically to buy and fix a home. These definitely should be considered if a home is in good condition, but does not meet your goals, i.e. out dated kitchen, flooring, issues with roof, etc. This program allows you to both purchase and repair a home with a single transaction.
In addition to a typical home improvement project for this type of loan package, the 203-k mortgage loan program can be used to convert a one-family dwelling to a multi-family dwelling; perfect if you need to move the in-laws in with you.
You're probably more acquainted with mortgage financing plans that provide permanent financing. That is you pay your closing fees, sign for a home, and deal with the lender on a monthly basis, when you pay your mortgage. The significance of a 203K loan allows the buyer to roll in the costs of repairs to rehabilitate the property into the mortgage loan.
When rehabilitation is involved, the lender requires the home improvements to be finished before the long-term mortgage is made. You really sit down at closing to sign off on 2 loans; a temporary one for construction/rehabbing of the property, then your 15 or 30 year mortgage after all improvements have been completed.
There are 2 FHA 203k loans; the FHA 203k Rehab and the FHA 203k
Streamline. The FHA 203k Rehab enables borrowers to obtain a single mortgage to finance the purchase and the rehabilitation costs of the property. Minimum improvements are $5,000.
The 203k Streamline key points; this loan has many of the same attributes of the 203k Rehab loan, except the Streamline loan has no minimum amount tagged onto repairs. The maximum amount of repairs is limited to $35,000 for major remodeling.
The 203k loan takes an average of 45 days to close; 30 days for minor remodeling projects and 60 days for projects involving major structure remodeling.
The qualification requirements are the same as a typical FHA mortgage loan however, you all need to submit a home project plan and budget for the improvements. The only additional item that the borrower needs is enough cash reserved to pay for materials and labor until they are reimbursed through the loan.
With an over-abundance of foreclosed properties that need rehabilitation, the 203K loan package is a perfect opportunity to get more house for less price (as-is market value) and be able to make improvements without borrowing from your personal savings.
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