Have you always dreamed of buying a fixer upper property? – A property which you can transform into a beautiful family home and hopefully sell on in the future for a significantly higher markup? If so, the only problem with your dream is likely a lack of upfront investment capital.
Thankfully, the Department of Housing and Urban Development has what is commonly referred to as an FHA fixer-upper loan. Even better, FHA 203k loans are just as perfect for existing homeowners who wish to remodel their existing property.
The Difference between the
FHA’s 203k and 203b Loan
Not to be confused with the more standard 203b loan model, a 203k FHA fixer-upper loan is designed specifically to provide borrowers with the funds which they need to fund the acquisition and comprehensive rehabilitation of a property.
Types of people who the 203k FHA fixer-upper loan is perfect for include:
- People looking to buy foreclosed properties from banks
- People looking to buy properties ‘as-is’ directly from owners
- People looking to purchase any kind of property requiring extensive renovation work,
- modern upgrades, and repairs
Terms & Conditions of 203k Loans Explained in more Detail
While a 203k loan will not cover the cost of luxury orientated renovations such as the inclusion of a pool on a new property, the FHA 203k will cover almost everything else.
From standalone kitchen and bathroom remodels to the adding of an extra story to a property, a 203k loan will provide you with the cash you need to carry out a wide variety of repairs and renovations. As an added bonus, loan amounts will often also include contingency funds should renovations run over budget, as well as up to six months of rent or mortgage payments should you need to spend time living at a separate location.
The FHA 203b Loan
Are you looking to buy a move in ready family home? If so, and home renovations simply aren’t your thing, you would likely be much better served by a standard 203b loan.
The FHA 203b loan is the most popular and often used FHA-backed mortgage product. With a 203b loan, your FHA mortgage down payment can be as little as 3.5% and you will be eligible for a home loan even if you have poor credit. The key difference between 203k and 203b loan types is that with the latter, your loan should be intended to pay the upfront price on a property which has already been appraised as not needing in excess of $5,000 of immediate repairs.