If you are interested in purchasing a home that may be in need of some repair or additional renovations, and need some additional funding to complete your purchase, you may want to consider an FHA 203K loan. This type of mortgage helps buyers acquire a home that could be classified as a fixer upper and helps them make renovations to the property. If you are interested in purchasing a home and completing some maintenance on it in Knoxville, Maryville, Lenoir City, Oak Ridge, and Gatlinburg, Tennessee, contact Foundation Mortgage. Our loan specialists can help you determine the best financing options for your situation.
The Basics of FHA 203K Loans
FHA 203K loans are backed by the government and can be used for two purposes; to purchase a home itself and to purchase home repairs. FHA 203K loans allow a borrower to purchase and renovate a home with either a fixed rate or an adjustable rate mortgage. Both the price of the home and the cost of maintenance are included within the loan amount. These types of loans were originally intended to assist families with lower incomes the opportunity to afford to buy an older home that perhaps is in need of some maintenance. FHA loans are classified into two different types, a 203K standard loan, which allows for significant structural repair and alterations costing at least $5,000, and a 203K limited loan, which provides up to $35,000 for home renovations that do not require major structural work. In addition to offering certain homebuyers the opportunity to own a home that may not ordinarily be able to afford one, these types of loans can offer many benefits. FHA 203K loans often have lenient qualification requirements, low interest rates, and low down payment options.
Qualification Requirements for an FHA 203K Loan
There are certain eligibility qualifications that must be met in order to qualify for an FHA 203K loan. Typical requirements include:
- You must be able to pay at least a 3.5% down payment. The total amount of the property will include the purchase price of the home and repair costs.
- You must have a debt-to-income ratio, (DTI), of 43% or less
- You must have a credit score of at least 500 or better
- You must not have foreclosed on any property within the last 3 years or you won’t be able to qualify for an FHA 203K loan
- There’s an FHA loan limit of $331,760 in areas that cost less, and a loan limit of $765,000 in more expensive areas
Getting Help With an FHA 203K Loan
If you are shopping for homes that are in need of some fixing up, and need financing assistance to help you afford your home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, Foundation Mortgage is here to help. Contact us today for a consultation.