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Published 3 months ago by massrealty with 0 Comments

What to Know About Rehab Loans When Buying a House

Are you planning on buying a home that needs work? If you are a first-time buyer or have a limited spending budget it is not uncommon to be looking at fixer-upper properties. Fixer-upper homes of course come with the task of making them more functional and sometimes livable as well.

  • What is an FHA 203k Loan

    FHA 203k loans explained FHA 203k loans explained
  • Using an FHA 203k to Finance a Home Purchase

    One of the first things you should do once you locate a property that is worthy of your consideration is figure out how you will finance the purchase. When you purchase homes that need work, one of the better methods is going with an FHA 203k rehab loan. The beauty of an FHA 203k is the fact that it's one mortgage.

    You essentially will be able to finance the cost of purchasing the property along with the cost of fixing it up. You will do this through one loan rather than have separate loans for purchase and renovation.

    There are two types of FHA 203k loans - one is limited and the other is standard. When a home does not need any structural renovation the limited 203k will more than likely suffice. With the limited financing option the mortgage will provide up to $35,000 for improvements. There is, however, a 15 percent contingency for any cost overruns. What this means is the real amount you have to spend is close to $30,000.

    The funds can be used for just about everything as long as it's not a structural repair.

    The options for projects that have a larger scope is the standard 203k loan. You can do most kind of larger improvements to the home with this kind of renovation loan, other than adding luxury amenities.

    Some of the uses for this type of mortgage would include structural damage, adding an addition, repairs that will be longer than 3 months to complete, repairs that need architectural planning, or moving load bearing walls.

    While there are other types of rehab loans or alternatives to financing a project such as this, the FHA 203k does offer great flexibility. Take a look at the excellent resource from Maximum Real Estate Exposure that goes into great detail explaining everything you need to know about this loan product.

    More than likely any questions you have about the 203k will be answered after reading the article. If you know others who will be buying a property that needs renovations, pass the information along to them as well.

 

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