203k Renovation Loan Refinance
Refinance Your Fixer upper with a 203k Renovation Loan
First of all, what is a 203K renovation loan? It actually says it all in one word – “renovation.” You know when you buy a car that is a bit old or has a couple of screws loose for a cheap price? However, your intention is not to leave it looking and feeling like a junker. By taking advantage of a renovation loan, you can really do some sweet fixing up to your little nest. Turn it in the place that you have always dreamed of.
Who sponsors a 203K Renovation Loan?
A 203K renovation loan stems from the federal government and given to buyers who want to fix up a property. In a lot of cases, a typical lender won’t allow you to acquire or refinance the home because it’s deemed not livable. However, a 203K renovation loan is perfect because you’ll have the funds to spruce it and give it a new feel, ultimately leading to some form of profitability down the line. You can very easily turn this home from dust mop to swifter jet.
What types of repairs can you receive?
There are two main repairs a buyer can use in the home. One repair is a regular 203K – focusing on structural repairs like adding a new room or fixing a damaged roof (the essentials). A streamlined 203K focuses more on adding new appliances. You have a bit of leniency for the type of repairs made, and the government gives you more dominion in the area you choose to fix the property, but you must remember a couple of things. First of all, you must make the home more energy efficient (weatherstripping and proper ventilation are key). Additionally, you need to make sure that the home is safe for living. These two factors reign supreme over everything else.
Pros and Cons to a 203K Renovation Loan
Let’s start with the plus side. If you are having trouble finding a home, this may be a great solution. Essentially, you will be backed by the federal government to fix up the property you wouldn’t have been able to fund otherwise. Unlike most conventional loans, down payments aren’t very high. Additionally, interest rates stay relatively low depending on the lender. Your credit score can be a bit lower like around 620 – most conventional lenders tend to accept 700 or better.
Now for the “not so good” side of this type of loan. Remember the saying, “nothing in life worth having comes easy?” Well, it’s not easy to find a property that fits under a 203K. Not to mention, a lender is always apprehensive – not just with a 203K but every other loan. Funding to fix up your home can be difficult. Also, you may need to hire an independent contractor to sign off on the actual items you intend to repair to see if it’s even feasible and reasonable. Cost estimates and a plan of what you will do with the property all play a part in getting loan approval.
Consult a good lender
It’s hard to find a lender in this type of loan situation, but there are some good ones out there. Keep in mind the type of budget you will be working with to fix up the necessary items in the home. Have a plan of action in motion before speaking to the lender. At the end of the day, you need to ensure him that the situation is doable. Also, try your best to keep interest rates in a ballpark that doesn’t have you dancing on the street for spare change. While you want to get the best rates possible, have some kind of range where you can find it manageable even if you have to meet in the middle.
Learn all you can about the kinds of homes that will warrant a 203K renovation loan and seek out federal lenders who will approve your ideas for fixing the home. Be aware that it may be a hard process but see through it with the right guidance and backing to make the situation worth it in the end.