Did you know that has a special FHA 203k renovation or “rehab” mortgage that provides financing for both the purchase and eligible repairs of a home? This program is fantastic for Florida buyers that are purchasing a home that needs some TLC. Below we will discuss the FHA 203K loan details & benefits, please contact us with any questions by calling or just submit the Info Request Form on this page.
To start, buyers should know there are two different types of FHA 203k loans. The first is regular 203k, which is geared towards properties that need more intense structural repairs or additions that exceed $35,000 in cost.
The second is the streamlined or “Limited” 203k, which is given for non-structural repairs or for when repairs total less than $35,000. The typical repairs we see on Limited FHA 203k loan are for basic repairs like the roof, HVAC, flooring, painting, kitchen or bathroom updates. Here is an example of more eligible repairs:
- Adding or replacing roofing, gutters, and downspouts
- Adding or replacing floors and/or floor treatments
- Major landscape work and site improvements
- Enhancing accessibility for a disabled person
- Making energy conservation improvements
- Structural alterations and reconstruction
- Modernization and improvements to the home’s function
- Elimination of health and safety hazards
- Changes that improve appearance and eliminate obsolescence
- Reconditioning or replacing plumbing; installing a well and/or septic system
If there is only one repair type needed, such as only flooring or only roof, then you just provide one estimate from a local licensed contractor. If there is more than one repair type, then you will need a General Contractor to oversee the project, and you will need to provide the written estimate from the GC.
Lenders will then take the repair estimate, add 10% for cost over-runs and add that to the purchase price and then your 3.5% down payment is computed from there. So, yes you can buy a house and borrow more money than the purchase price based on the “As Improved” value.
Buyers don’t need thousands of dollars in the bank to fund the repairs and improvements out of pocket. This program is especially helpful for homebuyers in more costly locations of Florida like Miami, Orlando, West Palm, Sarasota and Tampa.
MORE: “FHA does have loan limits in place depending on the property location. Buyers can look up their FHA loan limit here. “
Requirements For FHA 203k Loans
- Just like standard FHA loans, a down payment of 3.5% must be made. Down payment can be gifted from eligible sources like family, etc.
- Borrowers should have a minimum credit score of 620 to get approved for maximum 96.5% financing.
- Buyer’s debt to income ratio limit of 43% if your credit score is under 620. A higher ratio may be approved if for well-qualified applicants.
- Property Requirements – All properties must meet certain security, safety, and structural integrity requirements. We can do single-family houses, townhouses and select HUD-approved condos. No mobile or manufactured homes.
- Standard FHA loan limits apply.
- Owner Occupied primary residence only.
FHA 203k Loan Benefits:
The 203K loans help buyers purchase and repair a home before it can be occupied. Here are just some of the benefits of an FHA 203k loan:
- Finance post-closing repairs needed to make a home livable
- Appraisal is based on the “after improved value” of the home
- Compatible with approved down payment gift funds from a family member or friend
- No household income limits
- Borrowers are not required to be first time homebuyers
- Home seller can pay buyers closing costs
- Lower credit scores down to 600
- Great for fixer-uppers rehab homes
What about an FHA 203(k) loan if you already own your home? Yes, you can do an FHA 203k loan for a refinance as well! Please contact us today or submit the quick Info Request Form to learn more.
