Most people naturally think of mortgages for a new home purchase or refinance, but there’s another major purpose for many people: Renovations. In fact there’s a specific loan program for remodeling projects, known as the FHA 203k program.
Our mortgage loan officers have several options for these loans at Primary Residential Mortgage in Fort Myers. FHA 203k loans allow you to make improvements either to a house you’re looking to purchase or to your current home, and they can be used for a variety of projects at a variety of mortgage rates. Let’s look at a few basic bits of info on these loans.
The FHA 203k program is eligible for use on single-family homes, plus on one-to-four-unit buildings. These include the conversion of a building from a larger number of units down to four or fewer units. In certain cases, this loan program can also be used for improvements on a specific condominium unit – in the interior only. These cases require certain guidelines be followed, which our brokers can help explain to you.
The value of the home after work has been completed is an important area to gauge for these loans. An appraiser is given a copy of the contractor’s bid numbers – this is to identify the proper repairs and remodeling needed, plus their costs. From here, the appraiser determines the post-completion value of the home, subject to the improvements being made. Up to 110 percent of this value can then be used for the loan approval.
At the closing of the loan, funds are disbursed and renovation funds are placed in escrow based on previously submitted and accepted contractor bids. Renovation funds are then paid in draws to the contractors as work proceeds – final payments will come following inspection and completion. Specific disbursement schedules are organized on a case by case basis. No funds are ever released during closing.
Any funds left over after the renovation project can be used for additional allowable property improvements. Otherwise, they’ll be used to pay down the mortgage balance. Renovation is required to begin within 30 days of closing the loan, and must be finished within the timeframe established in the loan agreement. Total renovation time has to be 140 days or fewer.
Want to learn more about the FHA 203k program, or any of our other programs? Speak to our loan officers at Primary Residential Mortgage today.
*The views and opinions expressed are my own and do not necessarily represent the official policy or position of Primary Residential Mortgage, Inc.