203k Loan Bundling
Using a 203k loan allows you to combine loans for purchase (or refinance) and home improvement. This can reduce closing costs and paperwork; multiple loans mean more closing costs, and temporary loans may have higher interest rates than your 203k loan. You kill two birds with one loan.
Keep in mind that 203k loans require more paperwork than some other loans because you have to manage and document improvement projects.
Handle Dealbreakers
You may want to buy a home that’s almost perfect. However, serious defects may scare lenders off. If sellers won’t fix the problem, you can’t buy the house unless you use something like a 203k loan. The lender knows you’ll fix serious problems that you’ve agreed to fix, and they can move forward on the deal.
Temporary Housing
203k loans allow you to set money aside for housing while your repairs are completed. You can continue to pay an existing mortgage, or pay rent for up to six months. You won’t have to live with an ongoing construction project or come up with two housing payments each month.
Large Loans
Using a 203k loan provides access to large loans. Yes, there are limits, but you can borrow enough to finance 110% of the home’s projected value after improvement. 203k loans, like other FHA loans, have low down payment requirements (for better or worse). Because they’re guaranteed, the interest rate is competitive.
Improvements that Matter to You
The main benefit of 203k loans is the ability to make the improvements you want. Funding for an addition or updating the kitchen is taken care of up front. You can turn the home into something you want. If you’re environmentally conscious, you can even choose green appliances and materials.
