Some homes are completely up to date and entirely move-in ready. But other homes need a lot more love attention — which can be a good thing. When you find a fixer-upper, you’re able to make the improvements you want to make, and you’re able to establish the look and feel you want from a home.
But financing is always a challenge. Where can you find a renovation loan that will help you both buy and improve your home of choice? The answer is a 203K loan, which is designed specifically as a home improvement loan. Read on to learn more about fixer-upper loans like the 203K.
What Are 203K Fixer-Upper Loans?
The Federal Housing Administration (FHA) makes 203K loans available to qualified buyers through approved FHA lenders. You can borrow up to $35,000 in addition to the loan you take out to buy a property, and you can also take out the $35,000 on a home you already own.
How to Qualify for a 203K Loan
There are two major qualifying constraints when you seek out a 203K loan. First, your repairs must cost at least $5,000 in order for you to qualify for an FHA 203K loan. If you need to make only minor repairs that cost less than $5,000, you should seek financing elsewhere.
The second qualifying constraint is that your property’s value must fall within FHA limits. Your property’s value is calculated one of two ways. First, it may be calculated as the appraised value before renovations plus the cost of renovation. Or, second, it may be calculated as 110 percent of the property’s value after renovation. Whichever number is smaller is the number used to decide whether or not you qualify for a renovation loan.
What Types of Home Repairs Does a 203K Loan Cover?
Fixer-upper loans 203K are also designed for specific home improvements. The funds must be put toward general remodeling, structural repairs, new roofing, energy-efficient updates, new flooring, new plumbing, health and safety hazard elimination and/or adding a wheelchair ramp. These are fairly broad categories, so most home improvements fall into at least one of them.
How to Apply for a Home Improvement Loan
If you’re wondering how to buy a fixer-upper with a 203K loan, start by filling out an application with an FHA-approved lender. The Department of Housing and Urban Development keeps a list of approved lenders and you can filter that list to find lenders who have completed renovation loans in the last 12 months. Your lender should be able to answer questions and help you decide whether or not a 203K loan is right for you.
Get the Guidance You Need
At CENTURY 21 Core Partners, we have a great deal of experience in helping our clients find the fixer-uppers of their dreams. We know York, PA and surrounding areas inside and out, and we can provide the expert guidance you need to identify a property with potential.
Contact us today about finding the perfect fixer-upper in York, PA and surrounding areas.