There are many different types of home loans available to consumers. Many first time home buyers or those who enjoy performing rehabilitation work on a property can apply for a 203k loan. These types of loans are combined with standard mortgages to help buyers pay for repairs to their properties.
Different Types of 203k Loans
There are a few different types of 203k loans that consumers can choose from:
-FHA 203k Loan – This type of loan combines funds from a traditional FHA mortgage with money for additional repairs that are needed on the home.
-203k Consultant Loan – A 203k Consultant loan is very similar to a traditional government backed mortgage. If a home needs structural repairs that cost more than $35,000, you’ll have to apply for this loan.
-203k Streamlined Loan – This type of loan is necessary for individuals who need to make repairs on their home that will likely cost less than $35,000.
The type of loan you choose will depend on your particular needs. If you find that your newly bought home will need major repairs, you’ll want to consult with someone about taking out a 203k Consultant Loan.
How to Apply for 203k Loans
The application process for 203k loans is similar to that of standard mortgages with the exception of a few rules.
Borrowers are first required to contact and use an FHA approved 203k consultant in their area. A consultant will help with the entire process, including document processing and loan disbursement.
Once a consultant is hired, he or she will begin the process of examining the property and writing a report. This write up includes cost analysis, contractor quotes, feasibility study and more. It’s all used to create a loan package to give to the lender when the time comes. A lender is then chosen based on the qualifications of the consumer and the amount of loan requested.
Funding the Loan
Once the consultant helps the consumer close on the loan, funds that need to be used for repairs will be placed in an escrow account by the bank. As repairs continue to occur, the bank will release an appropriate amount of funds based on a pre-determined draw schedule. These funds will be released directly to the general contractor who is in charge of the project.
Once all work is complete, the 203k loan consultant must inspect the property to ensure quality standards have been met.