It’s so easy to say that you’ll buy a house, and build a new home the way you like it. This is the dream for many homeowners, but some abandon this plan because of their attachment to their current home. In the end, they're able to convince themselves that all they need is a remodeling project to bring their house into the new era.
For many homeowners, choosing this path almost always includes applying for an FHA 203k loan, according to Primary Residential Mortgage.
Remodeling Your Home, with a Catch
If you now realize that you can opt for an FHA 203k, don’t hesitate to turn your plans around. As always with loans, it’s better to be sure about the insurance package. But, the most important thing about 203k is that there are two options, standard and limited. You can only get one, so you have to determine your most important priorities.
You also have a minimum and maximum amount that you can value you can borrow, determined by the nationwide FHA limits and certain figures. You’ll straighten this out with your mortgage partners, along with other things that come with 203k.
Myth-Busting FHA Mortgage Clichés
The biggest probable drawback to a 203k is the closing. There seems to be a consensus that FHA loans take forever, but in reality, it’s the banks that are the problem. It’s better to do business with a lender that has experience handling 203k loans for a faster process.
The other is that FHA 203k’s are much bigger loans. This is true, on the surface, because some owners consider the future value of their home. You always have the control of how much you’ll borrow, but anything over the buying and remodeling cost will become instant equity.
It is advisable to consult a trusted loan officer to make sure you understand the terms of this loan. The last thing you want is to stop in the middle of the renovation because you miscalculated everything.