What You Should Know About FHA 203(K) Home Loans
If you're a real estate agent, you know the challenge of selling a house that needs work. Because of age or previous homeowner neglect, a property might lack curb appeal and require renovations or cosmetic updates before it can compete with other properties in the area.
But even if a property isn’t the most prettiest house on the block, it might have potential. Whether a home is in complete despair or only needs minor upgrading, an FHA 203(K) home loan can turn a nightmare property into a dream home for your clients.
How Does an FHA 203(K) Home Loan Work?
The FHA 203(K) mortgage loan is a unique product because it allows borrowers to combine the cost of purchasing a home and the cost of home repairs into a single loan. The amount a borrower is eligible to receive is based on the estimated property value of the home after completing renovations.
A full FHA 203(k) provides funds for properties that require significant structural repairs. A streamline FHA 203(K) is for properties that only require cosmetic updates. This includes new floors, new windows, new countertops, new cabinets, etc. Streamline FHA 203(K) loans have a maximum loan amount of $35,000. There’s no maximum limit for a full FHA 203(K) loan, but the loan amount cannot exceed the maximum loan limit for the area.
Keep in mind that while this loan covers the cost of many home improvements and repairs, it doesn’t cover the cost of luxury additions such as a swimming pool.
An ugly house can sit on the real estate market for months with little interest from buyers, which is frustrating if you're the listing agent. By educating your borrowers on the benefits of an FHA 203(K) mortgage loan, they might be enticed to take a chance on a property that needs a little TLC.
Since this is a type of FHA home loan, borrowers must work with an FHA-approved mortgage lender and meet the minimum requirements of an FHA home loan.