Getting a 203K Loan for a Fixer-Upper: A Primer on FHA 203k Mortgage Loans
The thought of buying a fixer-upper and turning it into your dream home can seem so perfect. Every nook and cranny met just to your desired specifications! Unfortunately, the reality of this belief can be harsh. When you calculate the total amount it will cost to remodel, you often realize that you cannot afford it or you find out that a lender will not provide you with a loan because the home is considered “un-livable” as it is. Luckily, that is where an FHA 203K loan San Diego comes in. An FHA 203k loan is defined as a loan by the federal government and is given to buyers who want to buy a damaged or older home and make future repairs to it.
Here’s how it works: for example, you want to buy a home that needs a brand-new bathroom and kitchen. An FHA 203k lender would then give you the money to buy or refinance the house plus the money to do the necessary renovations to the kitchen and bathroom. Often the loan will also include: 1) an up to 20 percent “contingency reserve” so that you will contain the funds to complete the remodel and if it ends up costing more than the estimates suggested and/or 2) a provision that gives you up to six months of mortgage payments so you can live elsewhere while you are remodeling, but still being held accountable to pay the mortgage payments on the new home.
Which repairs qualify?
FHA 203k mortgage loans include two main types.The first is the regular 203K loan San Diego, which is given for homes that need structural repairs such as a new roof or a room addition; the second is the streamlined 203k, which is given for non-structural repairs such as painting and new appliances. Also, other repairs that an FHA 203k will cover include decks, patios, bathroom and kitchen remodels, flooring, plumbing, new siding, heating and air conditioning systems and additions to the home such as adding a second story.
The program will not cover any “luxury” improvements such as adding a tennis court or pool to the property.