The 203k Renovation Mortgage Loan is a good way to get a brand new residence in need of improvements or fix up your existing house. Visualize it as a one-time-close construction loan but with more relaxed standards since it's guaranteed by FHA.
Below are some of the highlights and some useful information.
- Permits repair/renovation costs to be added into the mortgage
- Major items (similar to foundation repair) ARE allowed
- Low down payment (3.5%) and the seller are allowed to still pay to as much as 6% of your mortgage closing costs
- Close before the repair/rehab starts
- Just one loan closing - money is disbursed on a draw basis after closing paid directly to the contractor
- Buyer may incorporate possible upgrades (for instance silestone counters)
Examples of Repairs/Renovations
- Foundation Repair
- Install New Shingles
- Paint Inside and Outside
- Install New Carpet or Upgrade to Solid wood floors
- Remodel Kitchen/Bath
- Upgrade Heating, Ventilation, and Cooling
- Refurbish Termite or Mold Damage
- Energy Efficiency Improvements
- Ugrade or Install Siding
- Make House Handicap Accessible
- Landscape designs/Exterior Updates
- Latest/Upgraded Appliances
- And More!
Accomplishing this is quite uncomplicated for those working with a professional mortgage advisor.
- Consumer is pre-approved according to salary, investments, credit, and scope of project
- Customers decides on house
- Borrower meets consultant at home for inspection & feasibility study
- Purchaser gets contractor proposal(s) and compares numbers with 203k consultant
- Labor write-up is done by consultant
- Home appraisal is executed "as completed" upon executed home purchase contract
- All underwriting requirements is finished and sent to Mortgage underwriter
- DE underwriter approves the home loan and the project
- Loan closing papers are prepared and transmitted to the escrow business
- Loan closes then rehab account is formed
- Available funds are disbursed as work is done and inspected
- Rehab is done & the consultant performs the final inspection
- Now with the process done, you'll be able to enjoy your new house!
It is vital that you keep in mind a few items which are either NOT acceptable or ONLY permitted via exception: Any luxury item and/or improvement that does not become a permanent part of the subject house will not be eligible or would require an exception. Those items include:
- Leisure or luxury enhancements, like pools, hot tubs, whirlpool baths
- Barbecue pits, bath houses, tennis courts, satellite dishes, tree surgery
- Additional or alterations to support commercial use or to equip or refurbish commercial use
- Washer and Dryers
As you are able to grasp this can be a involved mortgage loan but working with the best mortgage banker makes all of the difference.