203(k) Programs
FHA 203(k) and Fannie Mae Homestyle loan programs makes it possible to purchase or refinance a property and include the cost of the repairs/improvements in your long-term financing. With typical financing, those borrowers purchasing a fixer-upper would have to apply for two loans: one for the purchase and a separate home equity loan for repairs/renovations. With a 203(k) loan or a Homestyle loan, the two loans are combined resulting in fewer closing costs and less stress.
Renovation Loans
- Program is only available for owner-occupied properties.
- Loan amount is based on either the purchase price plus renovation costs or the projected market value after repairs, whichever is lower.
- Down payment is a percentage of total cost (acquisition plus repairs).
- Projected repair/remodeling costs are held in escrow and disbursed after inspection of completed work.
- Can be fixed-rate or adjustable-rate mortgages.
- Repairs/renovations must start within 30 days and be completed within 6 months.
- Can be used for 1-4 unit residential property, including condominiums
- Can be used to convert single family dwelling into a 2-4 dwelling or vice-versa as allowed by local zoning ordinances (see eligible properties)
- Up to six months of principal, interest, taxes and insurance may be financed to assist borrowers who would otherwise need to make double-housing payments due to uninhabitable condition of rehabilitation property
LIMITED K (formerly Streamline K) RENOVATION GUIDELINES (repair costs less than $35,000.00)
Eligible:
- Minor kitchen remodeling-not requiring structural repairs
- Interior/exterior painting
- Repair/replacement/upgrade of appliances
- Window and door replacements
- Replace/repair roof gutters and downspouts
Ineligible:
- Major remodeling/rehabilitation
- New construction, including room additions
- Repairs of structural damage
- Landscaping
- Any repair requiring a work schedule of more than 6 months
STANDARD K RENOVATION GUIDELINES (repair costs over $35,000.00)
Eligible:
- Full kitchen or bathroom remodel
- Garage
- Structural alterations/additions
- Major landscaping/decks/fencing
- Permanent improvements
Ineligible:
- New swimming pool/tennis court
- Gazebo or bathhouse
- Alterations/additions for commercial use
FANNIE MAE HOMESTYLE LOAN:
- Allows for almost any type of renovation or repair, including those classified as “luxury”, if the improvement is permanently affixed to the home and adds value.
- Renovations must be completed within 12 months. Seller concessions are permitted which means that your seller could potentially pay up to 9% of your closing costs!
- Can be used for a primary residence, second home and multiple-unit homes
- Minimum credit score for a primary residence is 620
- Minimum credit score for second home or investment property is 700
- Down payments range from as low as 5% for a single unit, primary residence to slightly more than 25% for second homes or investment properties.
Eligible:
- Full kitchen or bathroom remodel
- Installation and upgrading of landscaping
- Replacement of home appliances