Many home buyers fall in love with a home that is in need of repairs or TLC. There is an FHA loan for repairs called the FHA 203k rehab loan which is perfect for this situation. However, that is not the only option available to finance a home with an FHA loan and pay for repairs at the same time.
FHA Loan for Repairs
Many first time home buyers are looking for fixer upper homes at a discount so they can make the repairs and live in their dream home at a more affordable cost. Some other homeowners are looking to rehab a home they already live in through a refinance. An FHA loan can help you to accomplish this whether you are purchasing or refinancing a home.
Purchasing with an FHA Loan for Repairs
If you are purchasing a home that is in need of repairs, your first option should be the FHA 203k rehab loan. With this program, you can purchase the home with just 3.5% down and also borrow the money needed to repair or upgrade the home.
The repairs need to be completed within 6 months and a licensed contractor must perform the work. The lender will pay the contractor as the work is completed.
There are many things that can be done from painting, to landscaping to a complete remodel. If you would like to get a quote or to speak to someone about this program, complete this short contact form.
We welcome you to also read our full article on the FHA 203k rehab loan.
Refinancing with an FHA Loan for Repairs
If you already own the home and would like to cash out equity to pay for repairs, you can do that with your choice of two different FHA refinance programs.
Both of the programs below are available to you even if your current loan is not an FHA loan. This can also be done if you do not have a mortgage balance right now.
FHA 203k Rehab Loan
The FHA 203k rehab loan is also available if you already own the home. You can do this even if you do not have much equity in the home and you are permitted to borrow more than what the home is worth.
If you do have more than 80% equity in the home then you may want to consider the FHA cash out refinance instead.
FHA Cash Out Refinance
One of the huge benefits of the FHA cash out refinance is there are no rules or requirements on what you can do with the money that you cash out. You are permitted to cash out up to 80% of the home’s appraised value with this program.
When you consider there are no restrictions on what you can do with the money and you get all of the money immediately after closing, this would be our top choice if you need an FHA loan for repairs or upgrades to your home.
Read more about the FHA cash out refinance program.
FHA Loan for Repairs – FAQ
What repairs can be done with an FHA loan?
You are able to repair or update virtually anything inside or outside of your home with an FHA loan. Everything from paint to landscaping and even upgrading your appliances.
What credit score is needed for an FHA loan for repairs?
The minimum credit score needed for an FHA loan for repairs is 500. However, most lenders do not offer FHA loans to individuals who have poor credit.
Do you have to hire a contractor to perform the repairs?
You may be required to hire a contractor if you are selecting the 203k rehab loan. However, with the FHA cash out refinance you can perform the repairs yourself.