FHA 203k Home Improvement Projects
Recent data from the National Association of Realtors (NAR) shows 53% percent of home buyers embark on a home improvement project within 90 days of purchasing their new house. In addition to starting home improvements, 37% of new home buyers purchase appliances shortly after buying their new home.
Home improvements and new appliances can be costly and add significant financial stress to household budgets, especially after recently acquiring a new mortgage. Using the Federal Housing Administration’s (FHA) 203k or 203k Streamline rehabilitation loans may be an alternative to many home buyers who intend to undertake home improvements or purchase appliances.
What is the FHA 203k loan?
The FHA 203k or 203k Streamline loans allow for home repairs, improvements or appliances to be added the mortgage while purchasing the property. Financing the costs of repairs and/or improvements at the time of the purchase of a property potentially reduces home buyers’ expense of additional financial obligations from financing improvements.
The FHA 203k Streamline loan program is different than the 203k standard loan because it only allows home improvement and/or repair costs up $35,000. Also, the 203k Streamline does not allow for structural repairs and does not require a HUD approved consultant to oversee the improvements and repairs. Home buyers may submit a proposal from a licensed contractor for up to $35,000 in improvements, repairs, and/or appliances (must also include contingency reserve).
Because the FHA 203k or 203k Streamline mortgages offer permanent financing, borrowers need to obtain only one mortgage loan to finance both the purchase and the rehabilitation of the property. The mortgage amount is based on the work being completed and the projected value of the property. The FHA 203k and the FHA 203k Streamline mortgage loans are calculated the same way, which is based on the rehabilitation costs and projected value of the property.
Eligible Improvements for the 203K Streamline Mortgage:
- Remodeled kitchen and baths
- Modernize plumbing, heating, AC and electrical systems
- Roofing, gutters, downspouts, and windows
- Flooring, tiling and carpeting
- Energy conservation improvements
- Improvements for accessibility
- New free standing appliances
- Lead-based paint stabilization or abatement of lead-based paint hazards
All health, safety and energy conservation items must be addressed prior to completing any general home improvements. Luxury improvements are not eligible. Construction or additions can only be financed under the full 203K program (refer to HUD.gov for details).
Sources:
National Association of Realtors© (2013). Home Features Survey
Link to article : https://www.lender411.com/best-uses-for-fha-203k-loan/
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