When on the hunt for a new home, it may happen that you come across the perfect home in not-so-perfect condition. It can be challenging to get a mortgage on a fixer-upper, as lenders may be concerned that your home choice isn’t up to par with safety and livability standards.
You might also find yourself wondering whether you’ll really be able to afford all the renovations and repairs once you actually own the property.
With the FHA 203(k) Home Improvement Loan or the Conventional Dream Home Renovation Loan, you can not only finance the home you want to purchase, but also fund repairs and improvements that the property may require.
Regular vs. Streamlined
There are two different types of FHA 203(k) mortgages: regular and streamlined. While both can be used to purchase or refinance a property, the streamlined loan is for buyers purchasing property that only requires non-structural repairs. The regular home improvement loan is for properties that need structural renovations.
The good news is that the conditions for eligibility on a home improvement loan like this tend to be much more adaptive and flexible than your average home mortgage loan.
Though the credit score requirements are pretty high (you’ll need a minimum score of 620), those applying for this loan do not have to be purchasing a home for the very first time. In addition, because this is an FHA-guaranteed loan program, the required down payment is as low as 3.5% of the total cost of the property.
When considering this loan, it’s important to understand that the 203(k) loan is intended for buyers of properties who are planning to occupy it as opposed to those buying an investment or rental property. Properties that are eligible for this loan include FHA-approved condos, two- to four-unit properties, single-family residences, buyers planning to move an existing property to a new foundation, as well as tear downs (under the condition that a portion of the existing foundation will remain).
At TILA Mortgage, our certified loan consultants in Seattle and throughout Washington State can help you qualify for a 203(k) Home Improvement Loan or the Dream Home Renovation Loan. We help identify an excellent home mortgage option for you, and at competitive rates.