Renovation Loans & FHA 203k Loans

Save on Upfront Costs. 

Home renovation projects can be costly. Funding home remodeling projects with your mortgage could help keep you from tapping into your personal savings and avoid hefty upfront repair costs.

A Renovation Loan allows homebuyers or homeowners to finance the cost of repairs or upgrades into their mortgage, offering flexibility to improve a property without needing a separate loan. 

This type of loan can be used for various projects, from minor cosmetic changes to major structural renovations.

A 203k Loan, a specific type of FHA-backed renovation loan, is designed for buyers looking to purchase a home in need of repairs. 

It allows borrowers to finance up to 95% of the home’s "as-completed" value, covering both the purchase price and renovation costs in one loan. 

The 203k loan comes in two types: Standard 203k, which is for larger, structural repairs, and the Limited 203k, which is for simpler, non-structural updates like new flooring or kitchen remodeling.

WHERE WOULD I FIND A LIST OF HUD APPROVED 203k CONSULTANTS?

Both loans offer flexibility, helping buyers or current homeowners unlock the potential of properties that need a bit of work. 

They are great tools to turn a fixer-upper into a dream home while spreading renovation costs over the life of the mortgage.
 

 Financing Renovation Costs:

Since the renovation costs are included in the total loan amount, you can effectively finance the rehab costs along with your mortgage, which may require a lower cash out-of-pocket investment upfront. 

 LTV (Loan-to-Value) Ratios: 

Depending on the loan type, the LTV ratio might allow for a higher financing percentage. For example, some loans can finance up to 95% of the after-repair value, meaning you could put down less than the rehab costs themselves. 

• Credit Score: Typically requires a minimum credit score of 620, though some lenders may have stricter requirements.
• Down Payment: Usually requires at least a 3% down payment for conventional loans, depending on the lender.
• Property Type: Must be a primary residence, second home, or investment property.
• Renovation Costs: The renovation must be completed within a specified time, often 6-12 months.
• Appraisal: The home’s value after renovations must be appraised to determine loan eligibility.

• FHA Eligibility: You must meet all FHA loan eligibility guidelines, including income and credit requirements.
• Minimum Credit Score: FHA 203k loans generally require a credit score of at least 580.
• Property Type: The home must be a primary residence and meet FHA property standards.
• Repair Limits: Limited 203k loans cover repairs up to $35,000, while Standard 203k loans allow larger, structural improvements.
• Licensed Contractors: All renovation work must be done by FHA-approved licensed contractors.