We hope this FAQ page helps by making you aware of the advantages for the FHA 203(k) rehab loan and helps you to understand how this rehab loan combined with Select Home Solutions will be a great asset for you as a homebuyer as you look to purchase your new home.
What is a FHA 203(k) loan?
How does a renovation loan help me?
The majority of the properties available in your area are bank-owned and many of those properties are in unacceptable (AS-IS) condition for traditional mortgage financing. Therefore, without a renovation loan program (FHA 203k) the property may only be sold for cash, usually at a substantial discount, leaving you, as a homebuyer, with a limited inventory of properties to choose from.
Furthermore, the renovation loan program (FHA 203k) will give you the capability to implement your own design ideas and make your own selections for your new home which would NOT be an option for traditional mortgage financing. Keep in mind, if a home has been purchased and fixed-up to sell by an investor or other persons, the asking price for the property will be very close if not more than the actual value of the property, leaving you as a homebuyer no equity.
There is great potential for substantial equity with a renovation loan (FHA 203k) but will vary on a case by case basis. We will help you calculate your potential equity as we move forward with your new home purchase process. The FHA 203(k) renovation loan permits the homebuyer to finance those unacceptable (AS-IS) condition properties with low money down.
How much is my down payment?
What is the difference in costs associated with the loan/closing process between a traditional mortgage loan (FHA 203b) and the FHA 203(k) rehab loan?
What costs are eligible to be financed into the loan?
- The cost to purchase the property (in as-is condition)
- The cost to rehab the property (based on the homebuyer's needs and wants)
- Mortgage payments (up to 6 months) during the rehab period
- Permit costs
- Consultant fees
- Inspection and Title Update fees
- Contingency Reserve (minimum of 10%, 15% without utilities on at property)
- Architectural & Engineering fees (if necessary)
What repairs/renovations are eligible for the FHA 203(k) loan?
- Structural alterations and re-construction
- Changes for improved functions and modernization
- Elimination of health/safety hazards
- Changes for aesthetic appeal
- Plumbing, heating, air conditioning and electrical
- Well and/or septic repairs
- Roofing, gutters and down spouts
- Flooring upgrades (carpet, hardwood, tile, etc.)
- Kitchen and/or Bathroom upgrades
- Energy conservation improvements
- Major landscape and site improvement
- Access for the disabled
Is there a minimum amount of time I must own a home purchased with a FHA 203K Loan?
No, there is no minimum amount of time that you are required to own the home, but the home must be owner occupied. This program cannot be used for investment purposes.