Most house hunters prefer to find a home that meets all their desired criteria and does not require much work prior to moving in. Unfortunately, this is easier said than done. With the inventory of homes for sale being so low, many home buyers are having to consider project homes that require a lot of work. This is where a 203(k) loan may be a great solution. A 203(k) loan is a type of mortgage that allows you to finance the purchase and renovation of a home in one loan. This can be a great option if you’re looking for a fixer-upper or if you want to make major improvements to your current home.
Benefits of a 203(k) loan
- You can finance the purchase and renovation of a home in one loan.
- You may be able to qualify for a 203(k) loan even if you have less-than-perfect credit.
- There are no prepayment penalties, so you can pay off your loan early without any additional fees.
- You can use the loan to finance a wide range of repairs and improvements, including:
- Electrical work
- Kitchen and bathroom remodeling
Things to consider when getting a 203(k) loan
- You’ll need to work with a lender who is approved to offer 203(k) loans.
- You’ll need to get a home inspection before you can apply for a 203(k) loan. The inspection will identify any major repairs that need to be made to the home.
- You’ll need to create a budget for the repairs and improvements. The budget will need to be approved by the lender.
- You’ll need to hire a licensed contractor to do the work. The contractor will need to be approved by the lender.
- The lender will release the loan funds to the contractor as the work is completed.
Given the inventory challenges being faced by buyers in the current market, this loan can potentially open up more possibilities. Of course, typically this will require both buyers and sellers to be willing to wait a few extra months to close. In addition, since lenders view these loans as more risky, buyers will need to be willing to pay a higher interest rates. Not to mention, they will also be taking on the added stress of a home renovation.
Are you looking to buy a home in the South Florida market? We can help! Contact our friendly team at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search app for your mobile device.