What exactly is a 203k? It’s a loan that allows you to wrap your mortgage and renovation costs into one monthly payment! Cost of home + cost of renovations…in ONE loan!
Here are some quick facts regarding 203k’s:
• Same requirements as an FHA loan
• Low down payment requirement – 3.5%
• Designed primarily for fixer uppers. Therefore, you can qualify for a home that you may not have otherwise.
• Not for investment properties (must be your primary residence)
• Two types: streamlined ($35K cap, home is habitable) and standard (meant for “bigger jobs”)
• Adjustable rate and fixed-rate mortgages are available
• Refinancing current mortgage into a 203k is also an option.
• Can NOT be a DIY project. A general contractor must be hired to complete project
• Repairs must begin with 30 days of closing and be completed within six months
There are some great benefits of utilizing a 203k. A 203k can offer a financial solution for borrowers and save them time and money. The acquisition and rehabilitation of a property is combined into a single loan. Therefore, one does not have to use money in savings or credit cards to pay for the rehabilitation of the property! A couple of other key benefits are instant equity and less competition when purchasing.
Also, it should be noted that the misconception that a 203K takes longer to process, is simply not true. If you have a good loan officer, the process can easily be completed in 30-45 days.
Finally, it is CRITICAL to hire a reputable contractor that has experience with 203k’s. A contractor that can help you step by step and assist you in deciding what upgrades/renovations are in your budget. Also, one that can complete your project on time.
Let Custom Home Elements assist you with your next 203k project. We never fail to impress!
For more information visit: https://www.hud.gov/program_offices/housing/sfh/203k OR give us a call at (703) 327-1100