203K loans have been around for years, but they are becoming a focus for banks and are increasingly popular for borrowers. 203K loans are known as “Renovation Loans” and are a great option for anyone who wants work done on a house right away, especially those purchasing neglected foreclosures and short sales. Homeowners who want home improvement work done can refinance with a 203K loan and roll the money for the improvements into the loan. Interest rates for the 203K programs are surprisingly lower than you may think and, in some cases, buyers and homeowners can borrow up to 110% of the new value (after improvements). For example, if the current appraised value of a house is worth $200k and the appraised value after adding a dream kitchen and flooring increases the value to $250k; then qualified borrowers can borrow up to $275k on the property, whether it’s a purchase or refinance. Not bad right?
There are three different 203K programs: FHA Standard, FHA Streamline, and Conventional. The best bet for investors would be the 203K Conventional program. These lending programs are an avenue for the housing market to improve – by either restoring value to foreclosures or to assist anyone looking to purchase who does not have the immediate funds for improvements.
Wells Fargo is one bank I know of that offers the 203K programs. At some point in the process you will need a reputable contractor to give you an estimate on the work you are looking for. This contractor should offer this at no charge, like we do at Premier Remodeling and Design.
Feel free to contact us if you are wondering who you need to talk to about details on the 203K loan or are interested in getting a free estimate on the home improvements. Either way, we will point you in the right direction.