From its name, you can easily guess that FHA 203(K) loans are meant for rehabilitation; but the reclamation is meant for houses that need extra care for existence. Home owners who are planning to revitalize their houses can make use of this loan scheme. FHA 203(K) is provided by a government agency called the Federal Housing Administration. These loans are actually put forth to assist people who need their houses to be renovated since it has suffered damage. FHA 203(K) loan program requires lesser down payment and the eligibility criteria are not very tight when compared to other loan schemes.
Types of FHA 203(K)
There are two major FHA 203(K) loan programs available depending upon the requirement of the owner:
Regular 203(K) loans – This program is to provide financial assistance for houses which are in need of changes which brings out safety standards. The structural repairs include leaning, curving, cracking or bulging walls. It does not demand design analysis.
Streamlined 203(K) loans – This program facilitates financial assistance for houses which are in need of non-structural repairs. These repairs involve the internal drainage and filtration systems which do not include the external renovations. Basically electrical, plumbing and mechanical remodeling works fall under this category.
Qualification Criteria
Types of residences which qualify for rehabilitation loans are listed:
- Tear-downs: Repairs which are done externally on the houses with the foundation still remaining as it is.
- Old homes: Residences which are already apt for existence but at-least one year old.
- Dwelling homes: Houses which are occupied by a single family, three families or four families are all included under this scheme.
- Condominiums: Property which has been approved by FHA.
- Mixed-use spaces: Renovating houses which are under mixed uses such as commercial spaces.
- Unfinished buildings: Houses that are need to be extended with the same foundation of the existing building.
Repair works approval
Lenders do not approve loans for all kinds of renovations. There are specific conditions for home renovations for which 203(K) loans are applicable. Not all the repairs qualify which include slight modifications which may not be that necessary. Lenders would give you a list of renovations which are applicable for the loans:
- Heating and ventilation
- Air-conditioning and site grading
- Roofing, flooring and plumbing
- Bathroom and kitchen remodeling
- Room additions and new household appliances
- Attic or basement completion
- Energy conservation
- Decks and balconies
- Detriment access
- Second-story additions
Though the homeowner accomplishes renovations, labor costs should be listed in the loan application.
Special considerations
Renovating a house is a good plan whereas, spending a lot is not a good idea. This is due to the fact that higher expenditure on homes would not assure increase in the home value. visit website and It would be a better option for people who cannot afford to spend for a fixer-upper. When you apply for a 203(K), special considerations are:
- Many lenders would not offer 203(K).
- Shop around and find out the best creditor.
- Spend more time on documentation.
- Interact a lot with the authorities.
- Interest rates are higher due to the risk.
- Process takes from 60 to 90 days.
