Finding a home in the right area and at the right price can be tough enough as it is. Finding all of the features you want in a home on top of that can almost seem impossible. Many buyers will have to settle for something that meets most of their needs, but not all. Another option is to purchase a home that might need some repairs or updates. Rehab and renovation projects allow a buyer to turn any home into the home of their dreams. The FHA 203k loan is designed to make these types of projects easier than ever. The McDaniel Mortgage Group offers great rates and terms on FHA 203k loans throughout Dallas and the nearby Texas communities.
The FHA 203k loan is a loan backed by the Federal Housing Administration that allows a borrower to combine both the purchase of a home and the added costs of repairs or renovations into a single mortgage. Rehab projects can be intimidating for many buyers. By combining the purchase of a home and the cost of repairs and renovations into a single loan, these types of projects are streamlined and can be more appealing. Just like the standard FHA loan, the FHA 203k loan makes it possible for borrowers to qualify with low down payments and less than perfect credit.
FHA 203K OPTIONS
FHA Standard 203k – The standard FHA 203k loan is designed for more complex renovations. That means projects that will require structural work, extensive remodeling, or any construction that would prevent the buyer from occupying the home during that time. At least $5,000 in renovation costs are needed for the standard 203k, and a HUD consultant will need to be hired to oversee the project.
FHA Limited 203k – Also commonly referred to as the FHA streamlined 203k loan, this option is for projects that do not exceed $35,000 in total repair costs. The limited 203k is the best option when it comes to smaller renovations, such as adding new appliances, new roofing, and other non-structural repairs.
QUALIFYING FOR AN FHA 203K LOAN
FHA 203k loans are often favored over similar rehab loan options given their ease of qualification. Borrowers are often able to qualify with a credit score of 580 and a down payment of only 3.5 percent. Just like the standard FHA loan, family members are even able to offer the down payment as a gift.
- Credit Score – Minimum of 500. Some lenders may require a higher minimum score
- Down Payment – Minimum of 3.5 percent of the purchase price with a credit score of 580 or higher. A score between 500 and 580 may require a down payment of 10% or more
- Income Requirements – A debt-to-income ratio of 43 percent or less is required. Up to 50 percent may be approved in certain circumstances
- FHA mortgage insurance is required. This includes an upfront premium of 1.75% of the loan amount and a monthly premium that will vary from buyer to buyer
FHA loan amounts are limited based on the county where the home being purchased is located. In the case of the FHA 203k loan, this is the combination of the home price and estimated repairs. In Dallas County, Texas, the FHA loan limit for a single-unit home is $404,800 and goes up to $778,450 for a four-plex.
If you are like many buyers searching for a home in Dallas, you may be struggling to find the perfect home that checks all of your boxes. The McDaniel Mortgage Group can help you turn any home into your dream home with an FHA 203k loan. Contact us today for more information FHA 203k loans or to begin the pre-qualification process!