7 Benefits of Getting an FHA 203(k) Loan
Buying a home is a major investment. And, if you’re like the average American homebuyer, it’s one you’ll probably live with for the next 13 years. When you make the decision to buy a house, you want to make sure it’s a purchase you can live with. Part of that involves making sure you can afford the monthly mortgage payment, but you also want to make sure it’s a place you’ll enjoy calling home.
Right now, move-in ready homes are hard to come by, especially for first-time homebuyers looking for starter homes in a lower price range. With a historically low supply of houses for sale, and an influx of bank-owned properties soon to flood the market, finding your dream home can be like finding a needle in a haystack.
This shortage of move-in condition homes leaves first-time homebuyers with the following options: settle and buy a home as is or pay top dollar to build new. Neither of which are preferable options if you’re trying to make a purchase you can actually live with. Enter the 203(k) loan…
What is an FHA 203(k) loan?
An FHA 203(k) loan is essentially a home improvement loan insured by the federal government that allows homebuyers to bundle their home purchase along with any desired home improvements under one mortgage loan. This is good news for homebuyers looking at homes that may require a little extra TLC. Whether the house is in need of some repairs or simply needs to be updated, a 203(k) loan can help homebuyers confidently address any repairs that may have been revealed during the inspection process and easily transform a fixer-upper into their dream home—without exhausting their bank account.
What are the benefits of getting a 203(k) loan?
- Mortgage the Unmortgagable. Just as mortgage applicants must meet specific criteria in order to qualify for financing, properties must also meet specific criteria in order to be considered mortgageable. Homes that have health, safety or structural hazards will be deemed unlivable, and likely denied for financing under conventional lending requirements. However, homes that are considered “unmortgagable” by conventional lending standards can be mortgaged through an FHA 203(k) loan, with the requirement that all health and safety improvements must be addressed prior to completing general home improvements.
- Fix it now and prevent problems later. If your home inspection does reveal repairs that need to be fixed, you can use the 203(k) loan to make the necessary improvements before you move in and avoid the hassle of saving the money to fix them down the road.
- Design on a dime. Home improvement costs can quickly add up. After you’ve allotted money for your down payment and closing costs it can be hard to find the funds to make home improvements. By bundling your desired home improvements and renovations into your mortgage loan, you’ll avoid exhausting your personal savings and you won’t have to take out interim loans, which are often characterized by high interest rates. With a 203(k) loan, you’ll enjoy the benefits of a lower interest rate and the ability to pay off the cost of renovation in manageable bite-sized chucks over the life of your loan.
- Transform your new house into your dream home. We all have a specific idea of what our dream home will look like and personal preferences when it comes to interior design and home décor. In fact, according to recent research, 72% of homeowners make home improvements because they want their home to reflect their personal style. Whether you want to paint the walls, replace the roof, buy new appliances or even add an addition, the 203(k) loan program allows you to easily transform your new house into your dream home. See what upgrades this newlywed couple was able to make with a 203(k) loan.
- Current homeowners can make upgrades, too. Even current homeowners can fund upgrades or repairs by refinancing into an FHA 203k loan.
- Build equity before you move in. One of the major perks of getting an FHA 203(k) loan is that you can start building equity in your new home before you even move in. By making improvements that increase the value of your home, you’ll instantly build equity in your home.
- Get the job done now. Because a 203(k) loan requires contractors to complete the desired home improvements, you won’t have to put your elbow grease into do-it-yourself projects. Not only does this ensure the job gets done right, it will get done in a timely matter, too. What would take you a matter of months to complete can be completed in a matter of weeks by skilled tradesmen.
As you can see, there are many benefits a 203(k) loan can offer. As one of the top FHA 203(k) lenders in Michigan, we can help you make your dream home a reality. Have questions? Send us a message, and we’d be happy to provide you with an answer!
