Financing a new home is tough enough as it is, but if the house of your dreams is in need of serious renovation, that creates an even more daunting situation. Normally a second separate loan is required to cover the home improvement aspect. But fortunately the Housing and Urban Development has an easier option. The HUD Rehabilitation and Repair Home Loan, or 203(k) allows a homebuyer to combine the purchase and renovation costs into a single mortgage.
Instructions
1. Weigh the pros and cons of a 203(k) loan versus a conventional home loan. The approval process for a 203(k) loan generally takes longer. The interest rate is also slightly higher than with a conventional loan, but the down payment is lower. Be aware that HUD itself does not issue mortgages directly. It insures the mortgages through the lender you choose.
2. Select an FHA-approved 203(k) lender after identifying the house you wish to purchase. Consult with your realtor to ensure that your plans for the home are feasible.
3. Come up with a proposal outlining of all the work to be done on the house and estimate the total expense. Renovations costs need to be a minimum of $5000 in order to qualify. The repairs also need to meet some basic HUD eligibility requirements.
4. Appraise the total projected value of the home, including the cost of renovations. After passing your lender's credit-worthiness test, closing the loan and paying the seller of the property, a portion of the loan will be placed into an escrow account. This account provides funding for the renovation process.
Tags: Rehabilitation Repair, Rehabilitation Repair Home, Repair Home, Repair Home Loan
