FHA Renovation Loan Tips
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What else do you need to know about this type of mortgage?
FHA Rehab Loans Are for Fixer-Uppers
This is advantageous for any borrower who finds a home that may not pass an initial FHA appraisal. The FHA appraisal is good for the after-renovation condition of the home for loan purposes.
The type of FHA loan you use for buying a home that doesn’t need renovation (the FHA 203(b) is different than the type of loan that helps you repair or remodel the home (the FHA 203(k) rehab loan).
FHA Rehab Loans Are for Owner Occupiers
Are you thinking about flipping an older home? An FHA rehab loan may not be the right option for such a plan, as these loans are intended for owner-occupiers only.
That means at least one person obligated on the mortgage must live in the home as the primary residence once the renovation work is complete.
FHA Rehab Loans Are for Those Not in a Hurry
Some call it a “turnkey home.” a term in the industry referring to a house you can move into right away after the loan closes without waiting for repairs or renovations.
If you need a turnkey house, the FHA 203(k) rehab loan option may not be right for you, but if you can afford to wait out the renovation process, you’re in a much better position to apply for a rehab loan.
FHA Rehab Loans Have Approved Options and Unapproved Options
Approved: energy-saving appliances, storm windows, and other features to improve the efficiency of your house. Not approved: luxury items like swimming pools, barbecue pits, or other optional add-ons to the property.
Major renovations to the home and work on load-bearing walls using the “full” version of the 203(k) rehab loan are also approved. However, using the smaller “limited 203(k)” rehab loan for major work on load-bearing walls is not approved.
FHA Rehab Loan Down Payments
An FHA rehab loan has the same FICO score requirements and down payment options as any other FHA loan, which means you may qualify for a down payment as low as 3.5% if your FICO scores and credit history meet lender requirements.
Ask a participating FHA lender about your rehab loan options and learn more about the differences between an FHA purchase loan, an FHA rehab loan, and optional add-ons to the loan such as the FHA energy efficient mortgage package.
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