FHA 203(k)

What is an FHA 203(k) Loan?


The standard FHA loan is generally what we think of when we think of a home loan, which is normal for a standard home. But for you, the home of your dreams may need some finishing touches, some updating, or some significant fixing and the standard loan just won’t cut it. So if your dream home needs some TLC to truly shine the FHA 203(k) loan is just what you need to get started. Designed specifically for buyers wanting to purchase a home that is deemed a “fixer”, the FHA 203(k) loan will provide you with the money you need to purchase the property and make the necessary repairs or updates.  

 

Some Perks of using an FHA 203(k) Loan

  1. Instead of getting one loan to buy the house and one to fix it, you can accomplish both by simply applying for the FHA 203(k) loan.
  2. You can include six months worth of payments in your loan if the house is not in livable condition while you are having repairs done. 
  3. Your loan amount is based on the estimated value of the home after the repairs or updates are completed, not the current value.


Some requirements when using an FHA 203(k) Loan

  1. You have to have all need repairs or updates done with in six months.
  2. You can only do the work yourself if you are licensed, bonded & insured (e.g. If you are a professional plumber you can fix the pipes, otherwise you need to hire a plumber).
  3. The house you want to purchase and fix up must be at least one year old.

Who Does and Does Not Qualify

  1. You can use the FHA 203(k) loan if you are a United States citizen with a valid social security number.
  2. Both permanent and non permanent resident aliens can qualify for the loan.
  3. Government agencies can not benefit from this loan program.
  4. Investors may not use this loan program as an investment opportunity.
  5. Non-profit agencies are not permitted to use this loan program.

What to improve with your FHA 203(k) Loan

  1. You can use your loan funds for home improvements like a new deck, inside/outside painting, room expansion and the purchase of some luxury items (e.g. claw foot soaking tub), if there are no other repairs needed.
  2. Under the terms of the loan, you would be required to weatherize the house or replace any faulty weatherizing efforts done by the previous owner.
  3. You will also be required to use the money to have fire alarms placed in each room of the house.

The FHA 203(k) loan really offers you a great deal, especially if your dream house is rather rough around the edges. Working with and IET real estate agent will make the process easier as he or she guides you through each step so you can take full advantage of all the loan can do to help you create your dream home. Don’t be scared off by older fixer homes, rather take advantage of the FHA 203(k) loan and the advice of your IET agent and in no time at all you will be enjoying the comfort of a newly remodeled home.