How to Get the Best Mortgage Series – Week 7

By: Edward Baswell, Home Authority Real Estate

Follow this series to learn how to get the best mortgage for your specific financial situation and goals. You’ll see what steps you need to take throughout this process to make it productive and successful.

This week you’ll learn about a loan that can help you buy a home and renovate it as well. It’s an affordable mortgage option out there that you should know about, especially if you buy a home that you plan on renovating.

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Maybe you’ve seen a home that you love but it was more fixer-upper than move-in-ready. Dated kitchen, not enough bathrooms or no open floor plan — but it had the perfect location for you.

Don’t cross it off your list! Whether you envision a big renovation or something on a smaller scale, there is a way to finance it.

You can roll the mortgage and the renovation costs into one safe, manageable FHA 203(k) loan. (Even homeowners can refinance and renovate with this loan.)

This 203(k) loan is a great option for those of you who don’t have a lot of cash and want to buy a home that needs work. There are two types of loans offered: a Standard 203(k) and a Limited 203(k). The limited version is for projects that cost $35,000 or less.

Go deeper…FHA 203(k) Loan: What It Is and How It Works

What Homes You Can Buy 

As long as the home is more than a year old, you can choose a single family, townhome, duplex, or even a multi-family dwelling if you want to convert to a single-family home.

Once you see a home you like, you would write an offer just like you would on any other home. Just be sure to indicate you will be using a 203(k) loan for financing.

Both your real estate agent and mortgage lender should be familiar with dealing with a 203(k) loan so that your pre-qualification, purchase offer, and closing process go smoothly.

Fix It Up — What’s Eligible

The 203(k) loan covers a wide range of repairs: Major jobs — a kitchen remodel, new roof, adding a second story, a complete teardown— and more cosmetic upgrades — replacing carpeting, new windows or new deck. 

The extensive list also covers repairs for termite damage, mold problems and other safety issues.

And if the home doesn’t have air conditioning, don’t worry, this loan will cover it. Even energy conservation improvements such as insulation or new energy efficient appliances are eligible.

The renovations, however, must include all mandatory repairs required to allow the property to meet FHA guidelines.

Limited 203(k) Loan for Smaller Projects

The Limited 203k version is a simplified version of the Standard 203k. It can be used for renovations that don’t exceed $35,000 including contingency, inspection and title update requirements. It is perfect for smaller projects that do not include any major remodeling.

It is also simplified because it does not require a HUD consultant and only has two fund draws. The first 50% of funds is released 30 days post settlement and the remainder of funds is released once a final inspection is completed by the FHA appraiser.

Using a 203(k) mortgage can be a practical solution for those looking to buy a home that needs significant repairs or upgrades, as it allows the financing of both the purchase and renovation costs in a single loan. To find out if this would be a good loan option for you, reach out to me. I can also help you find the right lender that can handle this type of mortgage loan.

Thanks for reading!

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Market Snapshot

This week’s Market Snapshot provided by Frances Estrada at Waterstone Mortgage, Albuquerque, NM.

Highlights:
December 2023
Median Sales Price: $344,000 (Up 9.6% from last year)
Total Homes Sold: 704 (Down 7.9% from last year)
Median Days on Market: 28 Days (Up 7.7% from last year)
Supply of Inventory: 2.1 Months (Up 3.4% from last year)
Percentage of List Price Received: 98.9% (Down 0.1% from last year)
New Listings: 800 (Down 19.7% from last month)
Median Price per Square Foot: $201 (Up 8.6% from last year)

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