Have you been thinking of buying a fixer upper but you don’t have the money to do the repairs? If you are thinking of buying a property that needs extensive repairs there is a federally backed lending program that enables buyers to roll the cost of necessary fixes into their mortgage.
The Federal Housing Administration’s 203(k) program provides funding for loans that cover purchase and renovation costs for single-family homes and multifamilies with up to four units.
Here are some things you need to know about a 203(k) loan:
The loan total amount is based on the property’s appraised value once the repairs are completed.
The required down-payment for a 203(k) loan is 3.5 percent.
203(k) loans are not available to investors . Borrowers must live in the properties.
203(k) loans are more expensive than conventional financing. The interest rates are slightly higher and private mortgage insurance (PMI) is required for a 203(k) loan.
Borrowers must hire a building consultant to write an initial estimate of the cost of planned repairs. The cost of the consultant could range from $400 to $1,000.
Renovations must be completed within six months after closing.
Loan limits depend on where the property is. For a single-family property, the limit ranges from $271,050 to $729,750.
For more information on a 203 (k) loan you can visit the U.S. Department of Housing and Urban Development website.