Two Mortgage Options For A New Home That Needs Renovations
203k FHA Loans are a great way to purchase or re-finance your home. Unlike conventional mortgage loans, the 203k Loan includes the renovation funds combined with the mortgage loan, so you only payback one loan. Once the sale or refinance is closed, renovation funds are held in escrow and paid out at approved intervals based on improvement completions.
203k FHA Loan vs. Conventional Loan Comparison
| Attribute | FHA 203k | Conventional |
| Down Payment | Minimum 3.5% | Minimum 5% |
| Credit Score rRequirements | 620-640 | 580-620 |
| Debt-To-Income Ratio | 41-45% | 43-50% |
| Closing Costs | 2-5% of purchase price | 3-6% of purchase price |
| Mortgage Insurance | Yes, along with small ongoing monthly fee | Required if less than 20% down |
| Seller Contributes to Closing Costs | 6% | 9% – if 20% down |
| Uses | Must be your primary residence. Minimum $5,000 Maximum $35,000 of Construction costs | No limits |
Related Articles
Want To Buy A Fixer-Upper, But Lack Funds? Consider A 203K Loan!
A Great Deal on a Home Does Not Require Major Renovations
Financing Your Home Renovation With Noah Shared Equity Contracts
What to Include in a Renovation Contract
8 Steps for Starting Your Renovation
Budgeting for a Renovation
3RD-PARTY RESOURCES
HUD.gov FHA 203k Website
FHA 203k Loan Calculator
HUD FHA Lender Directory
Approved FHA 203k Consultant Directory
FHA Loan Limits by County: 2020
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