203K Loan for a Refinance? Save and fix up 0
Are you thinking about refinancing and sprucing your place up a little bit too? An FHA 203K loan can knock both of those items off your To-Do list. A 203K Streamline loan is an FHA product that you can use to either buy a home or refinance your current mortgage and have as much as $35,000 left over after the closing to fix the house up. The best thing about it is that the appraised value is not based on the current condition of the home, but rather the condition of the home after the proposed rehab work is done. On a refinance, you would get a bid for the work that you want done, then a specially trained FHA 203K appraiser would look at you house in it’s current condition and then take the bid for the work that is being done and give a value as if the rehab work was already done. The new loan amouint can then be based on that final appraised value.
So say, for example, you have a home that is worth $200,000 in it’s current condition and your current loan is at $195,000. You get a bid that determines that it’s going to take about $20,000 to fix up your home the way you want it. (A streamline 203K is for rehab work only. It can’t be used to knock out walls, add additions, or pop the top.) Your lender (um…I’m available if you need a good lender, just saying) send’s out an appraiser. The appraiser looks at your $200,000 home and then looks at the scope of work on the bid, and determines that if you fix the house up with this work, it will be worth say $235,000. The lender then adds the $20,000 on to your current payoff of $195,000 so that you now have a loan of $215,000 (you can add the closing costs into the loan or bring that to closing). Now you have a house that is worth $235,000 and a loan of $215,000 (plus closing costs if you choose). So before you had $5,000 in equity and now you have around $20,000 in equity and you fixed the house up the way you want it.
Obviously not all scenarios would work that way but the 203K the only refinance product that I am aware of that allows the value to be based on the work being done, not the current condition. It is a great way to get a better rate (right now the 203K rate is in the mid 4% range) and fix your house up.
As always, you can contact me with any questions.