Understanding 203k Loans and How This Type of Loan Will Benefit You

Many first time home buyers will not be able to find homes that are within their budgets that do not need some type of repair or improvement. Homes that need some TLC can be transformed into dream homes and the cost associated with doing those renovations can be wrapped into a home loan.

What Exactly is a 203k Loan?

The Federal Housing Administration has made available a type of loan known as a 203k loan that makes it possible for include improvement costs in the amount of a home loan. Borrower's can keep interest rates low with this type of financing option also because it is insured by the Federal Housing Association. Home owners can also benefit from 203k loans because this type of loan can be secured for the costs associated with home improvement projects as well. Borrowers who qualify for a 203k loan will have one loan payment instead of two because one loan will accomplish two tasks. The process of applying for a 203k loan is no more burdensome than applying for a typical home loan.

The Documents Necessary to Apply for a 203k Loan

Working with a mortgage broker who is experienced in dealing with FHA loans should be the first step when starting the 203k loan application process. The necessary paperwork required to begin the 203k loan process will include income information and income history.

203k loans must be backed by contractor estimates which clearly show the costs of the renovations. It is imperative that an expert contractor is chosen to perform that work because the estimate amount needs to be as close to the repair costs as possible. 203k loans require that renovation and repair work begin within a certain time after the date of closing. Questions may arise after closing relating to certain aspects of a 203k loan which your mortgage broker will be able to quickly answer. Knowing which type of home loan will be best suited for you can be made clear after meeting with a qualified mortgage broker.

If a home is without of reach for a buyer, a homepath loan might also be a great option. Houses which are available for homepath loans have been repossessed. The cost of repairs can also be wrapped into the loan much like a 203k loan. Depending upon which house and type of loan best suits a borrow, he or she could qualify for either of these loan options to finance repair costs. Also, with both loans the down payment that is required is less than that of a traditional loan.

Applying for a home loan or specific type of loan often comes with stress, but understanding the types of loans which may be available to you will help ease that stress.