FHA 203K loans are highly beneficial to qualified borrowers but some restrictions do apply. This is where your overall loan process becomes impacted by the FHA needing to approve both contractors and lenders.
The FHA granting its approval for a specific lender, your desired repairs/improvements and preferred contractors might cause your loan approval process to take significantly longer than a traditional mortgage loan process would. Ultimately, however, each repair, their expenses, the contractor company you choose and the contractor’s costs must all be approved by the FHA prior to your 203K loan going through.
Many homeowners are fond of performing DIY repairs and renovations in modern times. Saving additional money via DIY renovations might seem like a great idea, especially when you are already experiencing financial hardship. This is likely not possible to do when you take out an FHA 203K loan, however. Because the FHA must approve all contractors, they are unlikely to approve you to perform your own renovation or repair work, especially if you have little-to-no professional experience.
Additionally, many FHA-approved contractors have contracts and a history working with the FHA. If you do have professional home renovation or repair experience and are capable of proving this fact to the FHA, you might receive an exception to do your own work, however.
Purchasing, refinancing and/or renovating a home with an FHA 203K loan provides numerous benefits. A few more terms, conditions and requirements still apply, however. For example, when you are seeking to refinance, renovate or repair your current home, you must have owned your home for a minimum of one year prior to applying for an FHA 203K loan.
If you owned your home for less than one year you will need to wait to apply or otherwise be disqualified. The FHA also sets guidelines pursuant to minimum repair amounts. All home repairs paid for using 203K loan monies must cost a minimum of $5,000. Even repairs totaling $4,900 will be disqualified when applying for one of these government sponsored loans.
The extent of the repairs also plays a part in your loan conditions. All repairs must be completed within a six-month period of time. Repairs and renovations requiring longer than six months will be disqualified from this FHA program. This means you need to plan your repairs and expenses carefully when applying for an FHA 203K loan. If you are able to meet the approval requirements for this type of government sponsored housing assistance and loan program, you will receive an excellent and highly beneficial deal. If this type of loan is right for you, read ahead to learn how to apply.
Additional FHA 203K loan terms and conditions also apply. Understanding how to apply for one of these government funded loans is also vital. Most additional terms and conditions are applicable to your income and credit rating. Learning how to apply involves:
- Understanding all requirements and conditions.
- Preparing your documents and information.
- Following appropriate instructions when submitting your application.
One additional condition not related to your income or credit rating is the amount of time you intend to live in the home you purchase with your FHA 203K loan. To qualify for this type of loan program you must intend to live in the home you purchase with FHA provided loan funds. This means these loans are only approved for purchasing homes where you and/or your family reside. Investment and rental properties are not permitted to be purchased using funds from an FHA 203K loan.