Buying a fixer-upper home can be financially smart and fun. You get to fix the home up how you want and increase its value all at the same time.
Most fixer-uppers won’t pass an appraisal though, so unless you have the cash to buy the property outright, finding financing could be difficult unless you apply for the FHA 203K loan.
This loan program provides financing to buy fixer-uppers and to fix them up all in one loan. It’s a great loan program that helps people buy homes they want and make them look how they want all without breaking the bank.
Here’s everything you must know about the FHA 203K loan.
Understanding the FHA 203K Loan
The FHA 203K loan is also called a rehab loan and for good reason. You’re given funds to buy and renovate the home.
The key difference between this loan and any other renovation loan is the lender is along for the ride with the renovations. When you apply for the loan, you must also provide your plans to renovate the home so the lender can see what will be done to it and the appraiser can determine the property’s after-repaired value based on the information provided.
To be clear, FHA 203K loans aren’t meant for completely run-down homes that aren’t safe and livable, though. The renovations to take place might bring the home up to code or modernize it, but not start the home from scratch.
Typically, the renovations must be able to be completed within 6 months to be considered for the loan program.
