Have you ever wanted to buy a fixer upper, but were worried about how to finance it? This is where a 203k loan comes in.
FHA 203k loans are a special kind offered by the FHA “Federal Housing Administration” which is run by the government. With the goal of revitalizing neighborhoods and encouraging lenders to fund riskier homes this loan was created.
These are typically used for homes that are damaged or in need of rehab. You will have the cost of the property as well as the cost of repairs covered with a lone like this. Also a a nice low down payment is all that is required and you may use it for a vast range of repairs.
The FHA 203k loan is a great loan option for many families but it is an underutilized loan. The FHA 203k loan is a federally insured mortgage loan that offers the option to buy a home as a primary residence and renovate it.
The loan provides money for renovations and repairs for the home in addition to the sales price of the property.
Here are some of the many benefits to the 203k loan:
- A 203k loan has a lower interest rate than a second mortgage or a personal loan. Many homeowners would turn to a second mortgage or a personal loan to finance home repairs. The 203k loan homeowners do not need to worry about where they will find the cash for the necessary renovations.
- There’s no need to touch personal cash flow. The 203k loan provides homeowners with the cash needed for home repairs. This allows homeowners to leave their savings account untouched. This can allow homeowners to have peace of mind during extensive home repairs.
- One of the biggest benefits of the 203k loan is that the interest paid on the loan is tax deductible. If the home repairs were being paid with funds from a personal loan the homeowner would not have those same tax benefits.
- The 203k loan opens up a wider selection of homes. Buying a fixer upper that needs repairs can allow you to afford a larger home or buy in a more exclusive neighborhood. Most home loans have strict requirements about the type of property you can buy. The 203k loan allows buyers to purchase a home that is outside of conventional loan requirements.
- You’ll see a greater rise in equity. Purchasing and renovating a home with the FHA 203k loan will allow homeowners to substantially increase their equity in a home. There is always a larger pay off in equity when a homeowner renovates their property instead of buying a move in ready home.
Buying a home with the FHA 203k loan can really pay off for many homeowners. Now that you understand the many benefits of a 203k loan, consider whether or not you should make your next home purchase with it. Aceltis offers the 203k loan with competitive rates and efficient processing. Give us a call or use our online form to get your 203k loan started.*