Bea ChaiklinSenior Loan Officer NMLS#: 59771
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Now a days, homes that are deemed as ‘Fixer Uppers’ are almost as popular as those that are move in ready. The FHA 203K loan is a way to simultaneously finance the acquisition of a property and the funds to remodel/ renovate the home.
You can finance a 1-4 family, residential, mixed use or condominium (approved by the FHA), which you plan to occupy as your primary residence only.
Once you find a potential property, you will need to select a licensed contractor and make a complete list of the items needing repair or replacement and the associated costs. You will need to break out the cost of labor and material in the scope of work. It is important to note that the must be on the lender’s approved list. If the contractor isn’t approved, they will need to complete a brief application and be thoroughly vetted.
Approved projects can include:
- Adding a patio or deck
- Complete bath and kitchen remodels
- Flooring, plumbing , electrical, roofing and siding
- HVAC systems, adding a bedroom or even a second story
- Structural repairs
- Installing new doors, windows
The FHA’s 203(k) loan program is perhaps one of the best ways to purchase an existing property that does need a little work. The program is perfect to finance a “fixer-upper” but not all FHA lenders offer the program. Your loan officer can provide you with the general requirements and how the program works, but here are a few Frequently Asked Questions about this special loan program.
What is the FHA 203(k) program?
The 203(k) renovation loan is designed to provide funds needed to buy or refinance a property as well as borrow more money to make designated improvements to the property all in one loan.
What sort of improvements can I finance with a 203(k) loan?
Common improvements to existing properties include:
- Roof repair or replacement
- Plumbing and electrical work
- Heating and air conditioning repair or replace
- Kitchen and bath remodels
- New appliances
- Outdoor decks and patios
- Adding additional square footage such as a bedroom or bath
- Other ...
The FHA 203(k) renovation loan is one of those mortgage programs that should get a lot more attention but don’t. Why? Maybe because fewer lenders offer the program and for lenders who aren’t familiar with this special loan they can often try and steer someone into another direction such as taking a higher cost equity loan or second mortgage. The 203(k) renovation loan is used to finance a primary residence on a property that requires some degree of improvements or remodeling.
For example, a home is listed at a below market value and with certain repairs the home would be worth so much more. Say a home needs a new kitchen as the appliances are too old and no longer working. The FHA loan allows borrowers to borrow the funds needed to not only finance the purchase but provide needed funds for a brand new kitchen all in one mortgage at competitive rates.
Or, the loan can be used for a bath remodel, repair or replace an outdoor deck or patio. If the HVAC systems don’t work you can borrow the funds needed to repair or replace the heating and cooling systems. What types of properties qualify for the FHA 203(k) renovation loan?
Remember the loan can only be used to finance a home in which you intend to live. Eligible properties include:
- An existing single family home that is at ...
For many American families, buying a home can seem out of reach. On top of financial stress, the competitive market may make buyers feel like they will never find a home they can afford. If you dream of buying a house but have lost hope because you don’t think you can afford it, don't give up. There are several things you can do to help make your dream of buying a home into a reality.
Search in More Affordable Neighborhoods
When trying to buy a house in a competitive market, you might see high-end houses snapped up in minutes. In order to avoid bidding wars and having to either walk away or agree to a price way outside your budget, consider looking at areas with less interest. This includes neighborhoods you may have written off—you may find a hidden gem in an area you originally ignored.
Consider neighborhoods farther away from downtown, which often have lower house values. You could get more bang for your buck in terms of home size and outdoor space in these areas. Some neighborhoods on public transit lines may end up being quicker commutes than areas closer to downtown metros.
Save for Amenities
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Successful money managers share a simple strategy: spend less than you make over a long period of time and invest the difference. Here’s list of the 5 worst things you can do to sabotage your financial independence:
- Not taking care of your credit score. You may think you’re doing all the right things credit-wise, but that may not be how credit-scoring firms evaluate your profile. Your balances may be too high, you may have too many credit cards, or you may have been late on a payment or two. All of these things affect your credit score, so be sure to check your credit report three times a year and dispute any mistakes you find.
- Not saving and overspending – Putting money aside is essential if you are going to be able to invest. Experts suggest saving 10 percent of your salary. It’s tempting to splurge, but develop a budget and stick with it. Even if retirement is a long way off, it takes a long time to save enough money to live comfortably once you leave the workforce. Starting today, make sure to save part of every dollar you earn.
- Waiting to purchase property– renting always seems like the less expensive option; however ultimately as a renter you are paying someone else’s rent. Your landlord is cashing in on home equity and value- these are benefits renters do not enjoy ...