fha | The Lowe Team

Your Guide to the FHA 203(k) Renovation Loan Program

by Desiree Lowe | Oct 17, 2024 | FHA, Home Loans, Homebuyers, Homeowners

Discover the Program Highlights of an FHA 203(k) Renovation Loan

Are you ready to turn a fixer-upper into your dream home? Whether it’s a home you’ve just bought or already own, renovation loans like the FHA 203(k) program may help you finance both the purchase and necessary repairs or updates all in one mortgage. Plus, the U.S. Department of Housing and Urban Development (HUD) announced that it is increasing the loan amount for Limited FHA 203(k) loans to $75,000 on all FHA case numbers effective November 4, 2024—that’s up from $35,000 which is huge news!

Here’s an in-depth look at how the FHA 203(k) renovation loan works, the differences between the Limited and Standard options, and what types of renovations may be covered.

What Is an FHA 203(k) Loan?

Insured by the Federal Housing Administration, the FHA 203(k) renovation loan allows homeowners to finance the cost of both the property and its renovations in a single loan. Whether you’re purchasing a home that needs updates or making repairs to your current home, this loan program may help make those dreams a reality. It offers the similar benefits of FHA loans for first-time buyers and repeat buyers alike. To qualify, eligible borrowers only need 3.5% down payment and there’s more lenient credit score requirements than other renovation loans.

Limited vs. Standard FHA 203(k) Renovation Loan

There are two types of FHA 203(k) loans—Standard and Limited. Each has specific uses and limits depending on the scope of renovations you can make.

Limited FHA 203(k) Loan

The Limited 203(k) option is commonly used for smaller repairs and cosmetic upgrades. As mentioned, the loan amount will increase to $75,000 in November 2024, an exciting enhancement that will help open the door to renovations for more people. This loan covers non-structural projects such as remodeling kitchen fixtures, replacing flooring, painting, and minor landscaping. Unlike the Standard, the Limited program doesn’t require working with an HUD consultant or have a minimum loan amount.

Common Projects the Limited Covers

Minor remodeling (i.e. updating kitchens or bathrooms)
Replacing appliances or flooring
Repainting or refinishing surfaces
Energy-efficient improvements (i.e. installing new windows or insulation)
Repairing roofs and gutters

Standard FHA 203(k) Loan

The Standard FHA 203(k) Renovation loan is more ideal for homes needing larger renovations and structural repairs. These may include adding rooms, replacing outdated plumbing or electrical systems, and fixing major structural issues. It has a minimum of $5,000 that must be used for renovations and the total loan amount must be within the FHA County Loan Limit. Because these projects are typically more complex, you’re required to work with an HUD-approved consultant.

Common Projects the Standard Covers

Structural repairs or additions (i.e. adding on square footage or fixing foundation issues)
Major systems replacements (i.e. plumbing, electrical, or HVAC systems)
Roof repairs or replacements
Modernization and improvements to the home’s function
Accessibility improvements for people with disabilities

How Does the FHA 203(k) Renovation Loan Work?

The process for applying for an FHA 203(k) loan is similar to a regular FHA mortgage but comes with a few additional steps. Here’s an overview of how this loan program works.

Find a property. Whether it’s a home you already own and want to refinance* or one you’re planning to purchase, identify a property that needs renovations.
Get an appraisal. The home appraisal will assess both the home’s current market value as well as it’s “as-completed” value after the renovations are completed.
Contractor and Estimates. Work with a licensed contractor to obtain the estimated costs for the repairs and improvements.
Loan Application. You’ll apply for the loan based on the combined cost of the home and repairs.
Renovation Timeline. Once the loan is approved, the renovation funds are placed into an escrow account and work begins. The renovation timeline can typically range from six months to one year.

*By refinancing an existing loan, total finance charges may be higher over the life of the loan.

FHA 203(k) Combined with FHA 203(h) Disaster Relief Loan

Did you know that eligible borrowers affected by federally declared disaster areas may be able to combine the FHA 203(k) renovation loan with the FHA 203(h) disaster relief loan? This means adding the renovation costs into a new mortgage if your home was destroyed and deemed unlivable. Plus, the damaged property is eligible regardless of the age of the home. It only needs to have been a habitable residence prior to the disaster.

Ready to Rebuild?

At Supreme Lending, we understand how important it is to transform a home into one that truly meets your needs. Whether you’re fixing up a new property or renovating your current home, the FHA 203(k) renovation loan offers an excellent way to finance those improvements. We’re proud to offer both Standard and Limited options to fit the scope of your home projects.

FHA Loan Benefits: Is This Mortgage Option Right for You?

by Desiree Lowe | Feb 20, 2024 | FHA, Home Loans, Homebuyers

When it comes to buying a home, which could be one of the biggest investments you make, it’s important to understand your financing options. While a Conventional loan is more traditional, FHA loans have seen a rise in popularity due to more flexible guidelines. Let’s dive into a few of the FHA loan benefits and features for homebuyers to consider when choosing a mortgage.

What is an FHA loan?

The Federal Housing Administration (FHA) knows the tremendous value homeownership can bring to people’s lives and communities, which is why it was founded in 1934 to boost home sales and the economy. The government organization offers special mortgage insurance to lenders as an option to help more people who may not qualify for a Conventional or other type of home loan, qualify through an FHA loan.

When applying for a home loan, an FHA loan may be a practical option, especially if you:

Are a first-time homebuyer.
Have a lower credit score.
Want a lower down payment.
Are refinancing a high-cost mortgage.

FHA loan benefits and features include:

Low down payment requirements with a minimum of 3.5%. Mortgage insurance is required.
Credit scores as low as 580 may be accepted.
Gift funds can be used for 100% of the down payment or closing costs.
Fixed-rate and adjustable-rate mortgage options are available.
Flexible qualification guidelines.

Now you might be asking, what properties are eligible for FHA loans? In addition to single family homes, FHA loans could also finance other qualified properties, such as 2- to 4-unit complexes and condos. Properties with an FHA loan will require an FHA appraisal to ensure the living space is safe and meets proper standards.

FHA loans could be a great option as a steppingstone into homeownership. Could these FHA loan benefits match your mortgage needs?

If you’re ready to see if an FHA loan or other home loan program is right for you, Supreme Lending is ready to help. Contact us to get started today!

Common Credit Score and Down Payment Requirements by Mortgage Type

by Desiree Lowe | Feb 12, 2024 | Family, FHA, Home Loans, Homebuyers

For aspiring homeowners and first-time buyers, many questions can arise about the mortgage process. What credit score do you need to qualify? How much down payment is required? Answers are based on several factors including the property, purchase price, and, most importantly, the mortgage type.

Here’s a breakdown to simplify the numbers and help you understand what you need to open the door to your dream home depending on common mortgage types:

What Is a Credit Score?

Commonly determined by FICO® score, credit scores are calculated using the borrower’s financial background information such as payment history, credit utilization, length of credit history, types of credit in use, and recent credit behavior. The average credit score in the United States in 2023 was 715, according to Experian data.

Down Payment Assistance Options

If a homebuyer doesn’t have the required minimum down payment or would like to access more financing, Supreme Lending offers several down payment assistance options for qualified buyers. This can also help first-time buyers open the door to homeownership. Guidelines and eligibility vary depending on the program. For example, the Supreme Dream program offers down payment assistance in the form of a fully forgivable second loan and requires a minimum credit score of 620. Ask your Supreme Lending Loan Officer about qualified assistance programs.

Understanding credit score and down payment requirements for different types of mortgages is crucial for prospective homebuyers. While each loan type has its own guidelines, maintaining a good credit score and having sufficient funds for upfront costs at closing remains a common denominator for securing favorable terms and interest rates. By proactively managing your credit and staying informed about your options, you can navigate the mortgage process with confidence on your journey to homeownership.

Contact your local Supreme Lending branch to get pre-qualified and learn about your home financing options.