If you want money to fix up a home as well as purchase/refinance it, the FHA 203K loan can be a good option. This loan gives you funds to purchase/refinance your loan as well as fix it up to a certain degree. The FHA 203K streamline loan provides you with up to $35,000 over the amount that you need to purchase/refinance the loan to make renovations.
The 203K streamline loan is different from the standard 203K loan. Not only can you only borrow up to $35,000, but you can only make non-structural changes to the home. Keep reading to learn the top five reasons to choose this loan option.
You Don’t Need a Loan Consultant
When you use the full FHA 203K loan, you have to pay for a loan consultant. This is a third-party that works with you on your 203K loan. The loan consultant helps you negotiate with the contractors, deal with your lender, and oversee the project.
While the loan consultant sounds like a helpful professional to have with you, they cost money. You can pay more than $1,000 for this professional. Since closing costs on loans are already as much as 5% of your loan amount, the loan consultant fee can really add to the cost of the loan. You don’t need a loan consultant for the FHA 203K streamline loan, which can save you a significant amount of money.
You Don’t Need Blueprints
If you use the FHA 203K loan and you make structural changes, you must have professional blueprints for the work to be done. The lender must then review the blueprints and approve the work. This costs money and can slow down the loan process.
With the FHA 203K loan, you don’t need blueprints. Granted, you can’t make any structural changes, such as adding a room or knocking down walls, but that isn’t the point of the loan. Any changes you make with the FHA 203K streamline loan are non-structural and even cosmetic. You can get the loan through the process faster when you use the streamline loan.
You Only Want to Make Cosmetic Changes
If you only want to make cosmetic changes to your home, there’s no reason to go through the hassle of the full 203K loan. Cosmetic changes can be done with you approving the work. There’s no reason to add the extra layer of the loan consultant and the expense it causes.
Cosmetic changes can usually be done with less than $35,000 and you definitely don’t need any type of blueprints to make them happen. With the streamline 203K loan, you are in charge of overseeing the work and approving it. Since you don’t need ‘special knowledge’ to know if cosmetic changes are done correctly, the streamline 203K can make things a lot easier and less expensive for you.
You Only Have Renovations That Cost Less than $15,000
If your renovations cost less than $15,000, you have even fewer restrictions to follow with the FHA 203K streamline loan. The lender doesn’t get very involved in the renovation process in this case. This means the process can go even faster.
Sometimes having the lender have a say in what the contractor does or in the level of work they completed, it can complicate things. You may be fine with the work that was done but if the lender doesn’t approve it, they won’t fund the project. If you have less than $15,000 in costs, though, the lender stays out it, leaving you in charge.
You Don’t Need Great Credit
Perhaps the largest benefit of the FHA 203K streamline (and the full 203K for that matter) is the low credit score requirements they have. You can get the loan with a credit score as low as 580. That’s unheard of with any other loan program.
The FHA lender will give you more funds than you need to purchase/refinance the loan, allowing you to make the renovations to the home with the use of a licensed contractor. Most other loan programs require a credit score of at least 680 in order to get funds to fix up a home. Plus it usually requires the use of two loans, where in this case, you have just one.
The FHA 203K streamline loan is a great loan to help you fix up a home that requires less than $35,000 in renovations. Even though you can’t make structural changes to the home, there are a lot of renovations you can make to enhance the appearance or function of a home.