How much money can you borrow?
A 203k loan may be a standard one or streamlined.
Streamlined 203k lets you borrow as much as $35,000 with no minimum repair cost with the addition of energy improvements. You may need to have an appraisal done to know the estimated value of the property before and after the repair.
Usually, you will need to make an initial payment of 3.5% of the value. The payment can be made by a family member or even your employer or any charitable organization.
On the other hand, a standard loan may exceed $35,000, but the maximum amount that you can borrow depends on the type of loan you get. Likewise, FHA set the limits for the maximum amount of money allowed for standard 203k loans.
You can borrow the minimum amount of $5,000 with a standard 203K loan.
Pros and Cons
203k loans has the advantages of:
- Reasonable interest rates and discounts (may vary depending on the lender)
- Having a home purchase and repair in one loan
- Minimal down payment requirements
However, 203k loans are far from perfect. Its downsides include:
- Difficult process in the application
- Funding limits
203k loans are great for home buyers wanting to have their dream house. Buying a house plus the home repairs can be very expensive, but availing of a 203k loan can solve this problem.
It’s also a good investment. You can save more money in the long run compared to renting a home.
Although it may not be for everyone, it’s worth giving a try. Home ownership is one step ahead in living the American dream.