Are you thinking about purchasing a fixer-upper? If so, then an FHA 203k loan may be the perfect financing option for you. In this blog post, we will tell you everything you need to know about FHA 203k loans so that you can decide if this is the right type of loan for your home renovation project.
What is an FHA 203k Loan?
An FHA 203k loan is a government-backed loan that allows borrowers to finance the purchase and renovation of a fixer-upper property all in one loan. This is especially helpful for buyers who do not have the extra cash on hand to pay for renovations in addition to their down payment and closing costs.
FHA 203k Eligibility Requirements
In order to qualify for an FHA 203k loan, you must meet the following eligibility requirements:
- You must be a first-time homebuyer or have not owned a home in the past three years
- The home must be your primary residence (you cannot use an FHA 203k loan to purchase investment property)
- The home must be structurally sound and habitable (no gutting allowed!)
- You must be planning to live in the home after renovations are completed (i.e., no flipping allowed)
Repair/Renovation Types Allowed with an FHA 203k Loan
Not all types of repairs and renovations are allowed with an FHA 203k loan. Below is a list of some of the common types of repairs and renovations that are eligible for funding:
- Minor or major repairs to the structure of the home
- Replacement of plumbing, electrical, or HVAC systems
- Energy-efficient upgrades
- Upgrades/additions to kitchens, bathrooms, or other living areas
As you can see, there are many benefits to taking out an FHA 203k loan when purchasing a fixer-upper. If you think this type of loan might be right for your next home purchase, then be sure to consult with a mortgage lender to discuss your options.