The Standard FHA loan VS FHA 203K loan
After thinking about the wonderful upgrades you want to make to your home, you might also wonder: “How will I pay for it?”. Unless you’ve been saving up and have a larger budget to work with, you will probably need to research your best options for low interest loans.
When buying a home for the first time, you can consider looking into a Federal Housing Administration (FHA) loan. A FHA loan will cover the selling price of the home, but not the renovations.
In addition, you can look into the HUD 203k FHA loan, which is basically an all-in-one loan that covers the cost of the property as well as the renovation costs! It even covers the down payment on the loan. It’s a great option for people who don’t want to deplete their savings. For example, the standard down payment on a 203k loan is 3.5%, which happens to be the same as the down payment required for a standard FHA 203B loan.
Here’s a sample breakdown of calculations for the FHA 203K loan:
Purchase Price$75,000Renovation Cost (incl. fees)$25,000Total$100,000Down payment$3,500
Purchase Price$500,000Renovation Cost (incl. fees)$100,000Total$600,000Down payment$21,000
The Standard VS The Streamline 203k Loan
The Standard 203K loan is similar to the loan described above. The Streamline 203K loan is designed to help you complete non-structural home improvement projects under $35,000, with quicker disbursements and closing times. The FHA 203K Streamline can be used for both purchases and refinances, and can cover most home improvements as well as appliance purchases and installation.
Regardless of the loan you decide, it’s always a good idea to consult with a professional about your financing needs.