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Is there a way for a buyer to roll repair costs into their mortgage when purchasing a home? Not all home purchases will qualify for a “Rehab Loan,” often called a 203(K) loan, and not all mortgage companies offer these types of loans. If you find a loan officer who works with 203(K) loans and you qualify, it can be quite helpful for homes needing a lot of repair and/or updating.
What is a 203(K) Rehab Mortgage?
At its core, a 203(K) loan is an FHA loan, but it also allows for repair and updating projects to be rolled into your mortgage. Some of the big advantages of working on a home with this type of loan are that the interest rates tend to be lower, FHA loans tend to have lower down payment requirements, and the costs will all be paid off in your monthly mortgage payment.
What are some of the restrictions?
The cost of repairs will need to be at least $5,000 to qualify for this loan. In order to process the loan, buyers need to obtain firm bids for the repairs and updating they plan to do. The 203(K) loans also tend to take longer to be approved because of all the additional work that needs to be done to make sure the updates will be completed and the costs stay within the limits of the loan.
What kind of work does a 203(K) loan cover?
There are many items a loan of this type covers, but some of the more common repairs and updates that fall under the 203(K) loan would be:
- Kitchen or bathroom remodels
- New flooring in the home
- Replacing worn out/old appliances
- HVAC systems
- Well and septic systems
- Removing health and/or safety hazards
- Roof replacement
- Adding gutters and downspouts
There are also other 203(K) loans available for smaller repairs and renovations. If you are thinking about buying a home that needs repair or modernization, find a loan officer who works with 203(K) loans to see if you qualify and get the process started.
If you have other questions about mortgage or for more information about Results Mortgage, visit https://www.resultsmortgage.com/.