Category: Mortgage 101

FHA 203K Loans

Home renovation project

renFinance both the cost of buying or refinancing a home and renovating the property with an FHA 203(k) mortgage from Luxury Mortgage.

WHAT ARE 203(k) LOANS?

An FHA 203(k) Loan is a type of mortgage that allows qualified borrowers to finance both the cost of their home and the cost of certain repairs, improvements and renovations into a single loan. These loans can also be used to refinance existing homes that are in need of repairs, renovations or upgrades.

HOW DO THEY WORK?

Since the 203(k) Loan program falls under the FHA Loan umbrella, it offers many of the same benefits as a typical FHA Loan. These include a small down payment minimum (typically 3.5%), competitive interest rates, ability to have the down payment funds gifted from an approved source, and the ability to have seller-paid closing costs.

BENEFITS OF 203(k) LOANS

Are you interested in a fixer upper but don’t have the funds to cover the cost of updating a home and making it your own? Did you fall in love with a house but it needs a new roof or other major repair? An FHA 203(k) loan could be the perfect solution.

1. ) FHA benefits – Since the 203(k) Loan program falls under the FHA Loan umbrella, it offers many of the same benefits as a typical FHA Loan. These include a small down payment minimum (typically 3.5%), competitive interest rates, ability to have the down payment funds gifted from an approved source, and the ability to have seller-paid closing costs.

2.) Can be used to “improve, not move” – When the housing market is in a crunch and fewer properties are for sale, many homeowners choose to invest in their current home instead of moving to a new home altogether. Likewise, some homeowners choose to “improve, not move” because they have developed a strong emotional attachment to their homes and want to stay in it as long as possible. Since a 203(k) Loan can be used to refinance an existing home, the funds can be used to repair or renovate the home to include amenities and features that make the homeowner(s) more comfortable. These can include aging-in-place features, eco-friendly upgrades, additions to accommodate an expanding family, or even handicap-accessible features.

Note that not all renovation projects are allowed under the FHA 203(k) program, but we’ll expand more on that below.

3.) Can be a great option for fixer-uppers – For first time home buyers or people on a tighter home buying budget, purchasing a fixer-upper can often mean getting a home at a great discount. However, the time and money it takes to improve a fixer upper can deter many potential buyers. With a 203(k) Loan, the financing is set up to include funds for both the purchase and repairs, making it a lot simpler and more affordable to finance the work.

Additional benefits and highlights include the following:

  • Low Mortgage Rates
  • Industry Leading Service
  • Can cover the cost of alternate housing during the repairs
  • Backed by HUD, allowing favorable terms
  • Available for purchase or refinancing

ALLOWABLE PROJECTS

With a renovation loan, your mortgage can be used to buy or refinance the home, plus pay for repairs and updates. Keep in mind however, not all home improvement projects will be covered in the 203(k) Loan.

Allowable projects include essential items such as fixing electrical, plumbing, or foundation issues, as well as improvements that will add value to the property like putting in a modern kitchen or building an addition.

Projects that are not eligible for financing under a 203(k) Loan include recreational items such as installing a swimming pool, tennis court, hot tub, etc. Other restrictions may apply. Talk to one of our loan professionals for details.

To summarize, FHA 203(k) Loans can be ideal for a variety of home buyers or homeowners who wish to make improvements and/or renovations to their property. If you would like to know more or request a free, no-obligation rate quote, please connect with us through our contact form, or simply give us a call at 888-379-0303

 



Mortgage Mistakes to Avoid Part II

mortgage mistakes

Getting a mortgage is exciting, but it can be pretty stressful, too. After all, a mortgage is likely the largest financial transaction you’ll make in your lifetime, so for most borrowers, the pressure’s high to get everything right. In order to alleviate some of that pressure and help reduce your mortgage-related stress, we compiled a list of mortgage mistakes that you can avoid to ensure your transaction goes through as smoothly as possible. We started the list back in April, but decided to expand on that post with a few extra points.

Take a look at the following mortgage mistakes to avoid. If you have any questions or concerns, don’t hesitate to discuss them with your loan professional. Continue reading Mortgage Mistakes to Avoid Part II


What credit score do I need to get a mortgage?

As you probably already know, your credit score is an integral piece of your overall financial picture. Your credit score has the power to help you get more credit, get approved for a lease, and when you’re ready, buy a home. But what constitutes a ‘good’ credit score? And just how good does your credit really need to be in order to get approved for a mortgage?

Whether you’re thinking of buying a home or refinancing your existing mortgage, your credit score will inevitably come into play. Knowing what to expect in the way of acceptable credit scores can help you be better prepared for the application and pre-approval process. Therefore, let’s dive in and find out what type of credit score is needed to secure a home loan. Continue reading What credit score do I need to get a mortgage?


FHA Loans vs USDA Mortgages – What Are Some of the Differences?

While FHA loans and USDA mortgages are both popular, affordable home financing programs, they each offer different benefits and have very specific eligibility requirements. Let’s take a look at some of these programs key differences.

Down Payment

While most conventional loans require at least 5-20% down, FHA loans typically only require 3.5% down.

USDA loans, by contrast, offer up to 100% financing, which means the borrower doesn’t have to make a down payment at all.

Mortgage Insurance

With FHA loans, there are two separate mortgage insurance premiums that the borrower will be responsible for paying: the upfront premium (typically paid at closing), and the yearly premium (which is typically broken up into monthly payments). Continue reading FHA Loans vs USDA Mortgages – What Are Some of the Differences?