I am a firm believer in that the FHA 203k renovation loan creates amazing opportunities. That is not to say that it is the perfect loan for everyone in every situation. Let’s take a look at both the good and bad aspects of an FHA 203k loan and see how it weighs out.
- Renovations can be anything from paint to kitchen appliances to adding an addition or even adding a second level to your home
- 3.5% down payment of the purchase price plus renovation costs
- Roll in all renovation and purchase costs into one low fixed interest rate
- Potentially gain instant equity
- Lower interest rates compared to construction loans
- Finance up to 6 months worth of mortgage payment s if the home is not habitable during construction
- Loan amounts can be based off of 110% of after improved value
- We can go to higher debt to income ratios (DTI) and credit scores down to 640
- Additional fees (mortgage insurance, consultant fees, title update fees, supplemental origination fees)
- Jacuzzis, pools, basketball courts and other luxury items are not included
- More moving parts
- Longer to close (~45-60 days)
While an FHA 203k loan does take a couple days longer and does have more moving parts than a conventional mortgage, it is still a great option to help you customize your house the way you want. Being able to finance your renovation costs into your mortgage, gain instant equity, and landing yourself in the home of your dreams is why the FHA 203k is one of the greatest mortgage products around and should be at least offered to you and considered.