FHA 203k loans can mean low risk for lenders, Instant Equity for Home Buyers


Any investment when done towards home leads to adding value to it. It becomes much more than just a home for its buyer. Everyone wants to have its own property and keep on maintaining year on year. However, the problem is that not everyone has the equity right to finance their Home Renovation projects so that it adds on more equity to it. Home is one of the biggest asset of the homemaker.

FHA has introduced a mortgage product which would help the homemaker in such tough times. That mortgage program is called as FHA 203 (k). This mortgage program is backed by the government and it helps to provide a host of services such as finance repairs, improvement in the home or renovation into a mortgage rather than drawing on the current equity. By going this approach, the individual would already be raising the value of its home.

The FHA 203(k) mortgage plan is mostly given to those buyers who are willing to go ahead and purchase an old house or a home which would need renovation. The FHA 203(k) would provide you the money to purchase the house as well as money to carry out the required improvement work in any part of the house. The FHA 203(k) is divided into two main categories wherein the first one is the regular or one can call it the standard 203(k) which is given to those buyers having a site which would need structural repairing work, adding a new garage to it or remodeling the house.

The second category is the limited 203(k) which is provided for improvement in the energy conservation, adding new appliances, carrying out non-structural repairing work which would include painting as well. Any other kind of repairing work which would be covered under the FHA 203(k) are plumbing, decks, flooring, patios, adding a second storey to the home etc. this mortgage program would not cover any kind of luxury related improvements in the home such as adding a pool or tennis court to the existing property also it would not include any kind of repairing work or improvement which does not become a permanent part of the property.
Below are some of the ways the mortgage program FHA 203 (k) can help to upgrade the instant equity to the home or you can say Home buyers.


  • The FHA 203 (k) is majorly dependent on the value of the home post the renovation or the home improvement work carried on it. If the appraiser would suggest that the renovation would add value to the home, then the homemaker would have an instant equity post the project work is completed. Also the monthly cost on the mortgage would be negligible.
  • Experts in terms of home loan suggest that any kind of rework or improvement carried out in the kitchen space can be one of the way to increase the value of the home. The mortgage program FHA 203(k) includes various types of work to be carried out in the kitchen, those work would include appliances, flooring and cabinets. Hence if you feel that your home is in need of a renovation since it has been ages the home did not undergo any makeover then it is the time to go for the FHA 203(k) mortgage loan program.
  • Value to the home can be done in a number of ways, the only thing the homemaker should decide is that it should be done in the right manner. You can go in for adding another bathroom, upgrade a whole new level or add another bedroom. All of these would add value to the home. The best way to get this done is getting in touch with a good contractor and lender so as to get the work done nicely and in prompt manner.
  • One of the guideline requirement of FHA 203(k) mortgage loan is that it should be owner occupant and also it cannot exceed 4 units. Apart from these guidelines, the home owner is pretty much free to use the home the way they would want to. There are multiple options left with the homemaker such as they can take the house and turn it into a duplex or rather rent a part of the house and stay in the another half of the house. By doing so, the investment which was standstill or lagging then turns out to be more fruitful and becomes a money making situation which can be termed as a valuable investment.
  • Regardless of how much home equity one has or the size of the down payment, the FHA borrowers would need to pay an upfront mortgage insurance. For those borrowers who would make a down payment of less than 20 percent or have a loan to value which is more than 78 percent or more there would be a requirement for annual mortgage insurance. If the borrowers default the FHA mortgage insurance would cover the losses to be borne by the lender. Also the 203k borrowers would need to pay an additional fee which would include a supplement fee either of 350 dollars or 1.5 percent of the repair cost. One of the biggest difference when it comes to qualifying for an FHA 203k mortgage program instead of the traditional FHA mortgage is that the individual must qualify based on the costs of the renovation which is in addition to the purchase price.

FHA 203(k) Lenders –
Until the recent times, the number of FHA 203(k) loan lenders was quite less which would offer this mortgage program to borrowers who were looking to renovate the home. Due to this less number, the genuine lenders who were well versed with the guidelines and the requirements of the FHA 203(k) were quite rare. However due to the recent changes bought up in the estate sector has changed a number of scenarios. The scenario is much better today wherein there has been an increase in the number of lender having proper knowledge of the FHA 203(k) guidelines. The homebuyers can look out for securing the necessary funds for renovating their homes by approaching an experienced FHA 203(k) lender. One should take care of multiple factors before going ahead with the selection of the appropriate FHA 203(k) lender.