{"id":728,"date":"2022-06-20T16:42:00","date_gmt":"2022-06-20T20:42:00","guid":{"rendered":"https:\/\/volunteerhomemortgage.com\/?p=728"},"modified":"2022-06-16T16:44:20","modified_gmt":"2022-06-16T20:44:20","slug":"how-does-fha-203k-loan-work","status":"publish","type":"post","link":"https:\/\/volunteerhomemortgage.com\/how-does-fha-203k-loan-work\/","title":{"rendered":"How Does an FHA 203(k) Loan Work?"},"content":{"rendered":"\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"500\" height=\"500\" src=\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2022\/06\/Sleep.gif\" alt=\"\" class=\"wp-image-731\"\/><\/figure>\n\n\n\n<p>Do you ever dream of buying a beautiful, old house and fixing it up? Or do you find yourself struggling to find a move-in ready home? Either way, the FHA 203(k) loan is made for people like you.<\/p>\n\n\n\n<p>This amazing loan lets you borrow money for the purchase of property and its repairs in one bundled mortgage. You can also use this loan to refinance your current home.<\/p>\n\n\n\n<p>The repairs need to cost more than $5,000 in total. When you close on the house, the lender will put the repair money in an escrow account. The money is then disbursed as your contractors complete the work.&nbsp;<\/p>\n\n\n\n<p><br>Because everything\u2019s bundled, you only have one payment to worry about every month. And <a href=\"https:\/\/volunteerhomemortgage.com\/fha-loans\/\">like all FHA loans<\/a>, the barrier for entry is much lower than a conventional mortgage.<\/p>\n\n\n\n<p><strong>Who Qualifies for an FHA 203(k) Loan?<\/strong><\/p>\n\n\n\n<p>The Federal House Administration (FHA) designed FHA 203(k) loans with middle- and lower-income buyers in mind. The goal is to help more people find homes while naturally rehabilitating rundown communities.&nbsp;<\/p>\n\n\n\n<p>The FHA tries to make it as easy as possible to qualify for these loans. You\u2019ll need:<\/p>\n\n\n\n<ul><li>A credit score of at least 500<\/li><li>A 10% down payment if your score is under 580 and a 3.5% down payment if it\u2019s above 579.<\/li><li>A property to buy that costs less than <a href=\"https:\/\/volunteerhomemortgage.com\/what-2022s-loan-limit-increases-mean-for-you\/\">the FHA\u2019s loan limit<\/a> for your area.<\/li><li>No foreclosures on your record within the past three years.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"600\" src=\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2022\/06\/Koala.gif\" alt=\"\" class=\"wp-image-732\"\/><\/figure>\n\n\n\n<p><strong>Limited 203(k) vs. Standard 203(k) FHA Loans<\/strong><\/p>\n\n\n\n<p>There are two kinds of 203(k) loans: limited and streamlined. Both have some similarities.&nbsp;<\/p>\n\n\n\n<p>First, they have to be used for your primary residence. That means you can\u2019t use them to renovate a house you intend to flip or rent out to someone else.&nbsp;<\/p>\n\n\n\n<p>Secondly, you\u2019ll have to pay an upfront mortgage insurance premium and a monthly mortgage insurance premium. Remember FHA loans are backed by the government. The mortgage insurance premiums help make this possible.<\/p>\n\n\n\n<p>How, then, are the two loan types different?<\/p>\n\n\n\n<p><strong>Limited 203(k) Loan<\/strong><\/p>\n\n\n\n<p>A limited 203(k) loan offers up to $35,000 for renovations. Major structural work does not qualify for this loan, but you can do things like cosmetic remodeling, repairing the plumbing, and replacing windows. Whatever projects you choose, the house has to be habitable the entire time.&nbsp;<\/p>\n\n\n\n<p><strong>Standard 203(k) Loan<\/strong><\/p>\n\n\n\n<p>The standard 203(k) loan is for houses in need of major repairs. The only cap on your loan is the <a href=\"https:\/\/volunteerhomemortgage.com\/what-2022s-loan-limit-increases-mean-for-you\/\">FHA\u2019s loan limit for your area<\/a>. For 2022, that limit is generally $420,680. The total value for your property must fall at or below this limit.<\/p>\n\n\n\n<p>Unlike the limited 203(k), the house doesn\u2019t have to be habitable for the duration of the renovations. Some funds may be used for housing if needed during renovations.&nbsp;<\/p>\n\n\n\n<p>You may have to work with a consultant from the U.S. Housing &amp; Urban Development Department (HUD). The HUD consultant will oversee the process and ensure that it complies with government codes.<\/p>\n\n\n\n<p><strong>What Renovations Does an FHA 203(k) Loan Cover?<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"480\" height=\"480\" src=\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2022\/06\/Schitts-Creek.gif\" alt=\"\" class=\"wp-image-733\"\/><\/figure>\n\n\n\n<p>Now, it\u2019s important to know that an FHA 203(k) loan won\u2019t cover every kind of renovation. The goal of the loan is to give you a comfortable, safe, clean place to live \u2014 not build a luxury retreat! Things like swimming pools, barbecue pits, and outdoor fireplaces won\u2019t qualify.&nbsp;<\/p>\n\n\n\n<p>You also can\u2019t use an FHA 203(k) loan for commercial purposes or to make improvements that aren\u2019t permanently attached to the property.&nbsp;<\/p>\n\n\n\n<p>That said, the list of items that <em>are<\/em> covered is a pretty long one. You can use your loan to remodel your kitchen, replace the siding, repair termite damage, install new windows, increase accessibility, and even put in a new patio. (<a href=\"https:\/\/volunteerhomemortgage.com\/loan-information-center\/203k-escrow-repair\/\">See the full list here<\/a>!)<\/p>\n\n\n\n<p>Before you secure the loan, you\u2019ll get quotes from FHA-approved contractors so you know how much money you need for the renovations. This also ensures that you\u2019ll have a crew ready to start working as soon as you close on the house.<\/p>\n\n\n\n<p>The repairs have to start within 30 days of closing and be finished within six months.&nbsp;<\/p>\n\n\n\n<p><strong>What if I Don\u2019t Have $5,000 in Repairs?<\/strong><\/p>\n\n\n\n<p>Some houses just need a little bit of work to get them move-in ready. If you\u2019ve found such a home, you may want to look at the FHA 203(b) loan with repair escrow. This loan works similarly to the 203(k) but on a much smaller scale. Your limit is $5,000 in repairs, and you have a shorter timeline. Work has to start within 15 days of closing and be finished within 60 days.<em> <\/em><a href=\"https:\/\/volunteerhomemortgage.com\/what-is-an-fha-203b-loan-with-repair-escrow\/\"><em>Learn more about the FHA 203(b)<\/em><\/a>.<\/p>\n\n\n\n<p><strong>Is an FHA 203(k) Loan Possible for You? Let\u2019s Find Out!<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"480\" height=\"270\" src=\"https:\/\/volunteerhomemortgage.com\/volunteer\/uploads\/2022\/06\/Thumbs-Up.gif\" alt=\"\" class=\"wp-image-734\"\/><\/figure>\n\n\n\n<p>When you\u2019re looking at fixer-uppers, you should know every loan available to you. Talk with one of our team members to learn more about the FHA 203(k) and other possibilities. We\u2019ll help you find the best mortgage for your situation and walk you through the entire process.<\/p>\n\n\n\n<p><a href=\"https:\/\/volunteerhomemortgage.com\/contact\/\">Contact our team today<\/a> to get preapproved!<\/p>\n\n\n\n<p><strong>[BUTTON: <\/strong><a href=\"https:\/\/volunteerhomemortgage.com\/contact\/\"><strong>I WANT TO LEARN MY LOAN OPTIONS!<\/strong><\/a><strong>]<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Do you ever dream of buying a beautiful, old house and fixing it up? Or do you find yourself struggling to find a move-in ready home? Either way, the FHA 203(k) loan is made for people like you. This amazing loan lets you borrow money for the purchase of property and its repairs in one [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":737,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"1200","footnotes":""},"categories":[10],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts\/728"}],"collection":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/comments?post=728"}],"version-history":[{"count":2,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts\/728\/revisions"}],"predecessor-version":[{"id":735,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/posts\/728\/revisions\/735"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/media\/737"}],"wp:attachment":[{"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/media?parent=728"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/categories?post=728"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/volunteerhomemortgage.com\/wp-json\/wp\/v2\/tags?post=728"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}