Imagine buying your first home and watching your family outgrow it. All those memories you're making make leaving the home difficult. You don’t have to leave it, even as your family grows. Did you know that as your family grows, so can your home? The FHA 203k is a home improvement loan that can help you finance repairs, upgrades and renovations right into the mortgage. It can cover simple repairs all the way up to structural upgrades. With the Full 203k you can add bedrooms or bathrooms, expand a kitchen or dining room or even add a second story to the home!
The Full (or Standard) FHA 203k covers home improvement projects that will change the structure of your home. You can literally “pop a top” on your ranch house and double your square footage if an appraiser can find similar homes – called comparables – in the area. Adding onto a home like this means you can increase your area much cheaper than of you were to sell the home and buy new, or build a home from scratch.
You can use the Full 203k when the home improvements exceed $35,000 (the max amount for the 203k Streamline) or when you need to make structural repairs. There must be a minimum of $5,000 worth of repairs. FHA loan limits are based on property type and location of the property being financed. A portion of the loan proceeds are used to pay off the existing mortgage in a refinance. The remaining funds are placed in an escrow account and released as rehabilitation is completed. You may also roll in up to six months of mortgage payments if the HUD consultant determines you need to be displaced from the home during the repairs, as you might be in the case of a major renovation.
You can make the following repairs and renovations to your home with the Full 203k:
Structural alterations and reconstruction:
- Room additions
- Repair of termite damage (sill plate replacement)
- Major remodeling of kitchens and bathrooms
- Finish an attic or basement
- Add a second story to a home
Major landscaping and site improvement:
- Correction of grading
- Drainage problems
- Tree removal (health and safety hazard)
- Repair of sidewalks (health and safety hazard)
- Driveway repair (health and safety hazard)
Armed with this information, you can see how homeowners can refinance and remodel with the FHA 203k. Yes, this means you'll have to refinance your current mortgage. But it's a better situation than trying to figure out how to use the current equity you may or may not have in your home. The FHA 203k option is based on the future value of the home once the work you're financing is completed.
Download "The Complete Guide to Spring Home Imporovement Financing" at the button below. The free eBook takes you through home improvements you can do yourself, and others you might "need help" with. Get your copy today.
(Old house photo: Flickr user Robin Zebrowski)