Finding the perfect home that has everything on your wish list isn’t an easy task. One option is to purchase a home that lacks a few key features and renovating or remodeling the home. Buying a fixer-upper can allow a buyer to turn just about any home into their dream home. Potential buyers are often scared or intimidated by remodeling and renovation projects, but they are not as difficult as some imagine thanks to programs such as the FHA 203k loan. Fairway Independent Mortgage Corporation offers FHA 203k loans throughout Florida and Georgia including Atlanta, Miami, and Orlando.
An FHA 203k loan is a loan that is backed by the Federal Housing Administration (FHA) that allows you to combine both the purchase of a home and the costs of repairs or renovations in a single mortgage. By consolidating the home purchase and repair costs, remodeling or renovating a home becomes a much more attractive option. Buyers require less money out of pocket and can also save money because closing costs are limited when only one loan is needed.
There are two types of FHA 203k home loans. There is a standard FHA 203k loan which is generally used for larger projects. The streamline FHA 203k on the other hand is used for less complex projects.
FHA Standard 203k –The Standard 203k is used for larger and more complex renovations that involve structural work, remodeling, or construction that prevents you from occupying the home during renovations. A standard 203k requires a minimum of $5,000 in renovation costs.
FHA Streamline 203k – The Streamline 203k program is designed for smaller improvements that will not exceed a total of $35,000. This option is used for projects such adding new appliances, new roofing, energy conservation improvements, and other non-structural repairs.
FHA Loan programs are often favored over other similar loan programs due to their relaxed credit and low down payment requirements. A credit score of 580 and a down payment of only 3.5 percent are generally the minimum requirements to qualify. If you do not have the minimum down payment requirement on hand, family members can even offer this money as a gift.
FHA Loan Requirements
- Credit Score – A credit score of 580 or higher will be generally be required to qualify for an FHA 203k loan.
- Income Requirements – A debt-to-income ratio of 43 percent or less is standard although up to 50 percent can be approved.
- Down Payment – A minimum down payment of 3.5 percent of the purchase price will be needed.
As with any FHA loan, there are two types of insurance premiums (MIP) that are required with an FHA 203k loan. The first is an up-front mortgage premium of 1.75% of the purchase price and the other is a recurring monthly premium which will be based on factors including the loan amount, LTV ratio, and the length of the mortgage. The maximum loan amount available for an FHA loan is limited by county. For the FHA 203k loan, this is the combination of the home price and estimated repairs.
Whether you are purchasing a project home in Atlanta, Miami, or Orlando, Fairway Independent Mortgage Corporation can help you turn any home into your dream home with an FHA 203k loan. Contact us today for more information on 203k loans or to begin the qualification process!