Is the FHA 203k my best choice for a renovation loan?

By
Home Inspector with 203kOnLine.com, covering the USA S0289

Is the FHA 203k my best choice for a renovation loan?

Not necessarily. What you should consider is what kind of down payment you may have. If you are looking for a low down payment then the FHA 203k loan may be your best option. They do penalize you however by making you pay an insurance premium each month called "PMI" or private mortgage insurance.  Currently is is 0.85% of the monthly payment. If your payment is $2000 per month your PMI would be about $170 per month.

The FannieMae HomeStyle Renovation Mortgage requires a bit more down payment but you can get out from under the PMI if you put down 20%.

I had a client not to long ago who was purchasing a property for over $1MM and wanted to do $625,500 in renovation. She was using the FHA 203k loan program... NOT the best choice for her however. The lender she was using only did the FHA 203k and didn't have access to the FannieMae product. Had she called me first I could have seen what she was doing and adviser her what lender to go to in order to achieve the best deal for her circumstances.

The FHA 203k program will carry the PMI in spite of the amount of the down payment. Her credit was excellent and the Fannie Mae product has no PMI with 20% down. In this case the 203k loan wouldn't have been the best solution at all.

Rely on your 203k consultant to let you know what 203k lender is closing these faster and to let  you know what lender had the right product for you client's needs. It isn't always the 203k. We have one renovation loan project that goes up to $3MM ($3,000,000) loan amount so you can work in most any neighborhood.

 

 

 

 

 

Uptown

Posted by

Mike Young, 203k Team Leader    Mike ready for your 203k order

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Comments (1)

Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

The 203k loan is an under-utilized tool. Many buyers could create equity by using the FHA/203k loan to buy and renovate homes that need some work.

Aug 12, 2017 07:58 AM