Columbia, South Carolina FHA 203k Renovation Loan Basics
Traditional mortgages aren't always approved for properties that require significant work and renovation. The South Carolina FHA 203K Renovation loan makes it easy to obtain authorization to purchase a home in poor condition. However, this type of loan is also appropriate for a property that doesn't need major work and only requires modest remodeling and improvements.
When applying for an FHA 203K loan, Columbia borrowers should be prepared to wait a little longer on closing than traditional mortgage loans. Sometimes a seller might be impatient and may want to close on a loan quickly, so a buyer must be prepared to convince the seller to wait just a little longer than usual for loan approval.
Despite this drawback, Columbia, South Carolina renovation loans do offer many additional features not regularly seen in traditional mortgage loans. Some of those benefits include:
- Small down payment options
- Option to roll closing costs into the loan
- Approval for minor or major renovations
One of the best features of a South Carolina 203K loan is that a buyer may borrow against the future value of the property, based upon the expected improvements and renovation. For a buyer investing in a distressed property, this offers a swift option for building equity in a newly purchased home. Another great feature of FHA 203K Renovation loans is that the loans will include extra funds just in case the planned renovations end up costing more than anticipated.
FHA 203K Renovation loans may be approved for up to 110 percent of the home's future value and the scheduled work must be completed within 6 months of the loan's closing date.
Whether a current homeowner wishes to renovate his current home or a buyer wishes to get his dream fixer-upper, a 203K Renovation loan is an excellent choice to help get work underway. FHA 203K Renovation loans also help communities rehabilitate Columbia neighborhoods and improve property values around distressed or vacant homes.
Structural Renovations in Columbia
A new home marketed as a "fixer-upper" might not qualify for a traditional mortgage, so a buyer might need to consider a South Carolina FHA 203K Renovation loan to secure a property. Banks often won't approve a loan if a home isn't habitable or requires significant repair, but with a 203K loan, the repairs are built into the loan amount.
The amount granted by the bank for a 203K loan is based upon the future value of a home after repairs are complete. A buyer might not be able to obtain funding with a traditional mortgage on a beautiful, old "fixer-upper," but an FHA 203K Renovation loan may be approved. These loans are also appropriate for current Columbia homeowners who wish to renovate their house.
When a homeowner is interested in making improvements to a home that are purely cosmetic in nature the most appropriate loan is an FHA 203K Streamline Refinance loan. A borrower may finance up to $35,000 over the purchase price of the home, which provides funds for cosmetic upgrades that don't require significant structural repair.
Traditional South Carolina mortgage loans are commonly based upon a simple appraisal number, which is determined by a bank appraiser. However, if a home is in need of significant repair, the bank might not extend financing until repairs are complete and the home is deemed "move-in ready."
In order to purchase a Columbia home that needs repairs, a buyer must either come up with the cash for repairs on his own or secure another loan. Getting an FHA 203K Streamlined Renovation loan is a much easier option because it considers the cost of repairs when determining the size of the loan.
Although a buyer might qualify for a construction loan to complete repairs on the home, those loans tend to have much higher interest rates and fees. An FHA 203K loan is designed to offer a low mortgage interest rate while also providing renovation funds.
An FHA 203K Streamlined loan cannot be approved for all types of repairs. Some of the construction projects that require a borrower apply for a Standard 203K instead of a Streamlined 203K include significant structural work, new construction and additions, and major repairs that require complex estimates.
Additionally, a Streamlined loan cannot be approved if the timeline for the repairs is expected to exceed 6 months or full repairs would need more than 2 draws. Finally, luxury items that aren't otherwise a permanent feature of the home would not be approved under Streamlined 203K financing.