An FHA 203k loan offers competitive purchase financing to help you with construction or remodel money to turn that fixer-upper into the home of your dreams. This loan falls into two categories: the 203k Streamline, which offers up to $35,000 for non-structural remodel work that can be done without architectural plans, and the full 203k, which offers unlimited funds up to a county’s high balance limit, which in most Bay Area counties caps at $625,500. Both loans function as purchase money with the balance of funds disbursed after close of escrow during the construction phase. Unlike standard mortgage financing that accepts only collateral in good condition, the 203k loan is based off of the future condition of the home. This allows the borrower to purchase a house in near tear-down condition so they can compete on properties that are otherwise relegated to “all-cash” offers.
Pinnacle Capital Mortgage offers the full scope of the FHA’s 203k loan program, and is without the restrictions many lenders have. Our expert in-house team manages all facets of the loan, from processing and underwriting through funding, and then onto our fulfillment and draw center, which is where most lenders drop the ball. The benefit of controlling fulfillment and draws is to insure a cohesive process so that clients are cared for throughout the construction phase until all work in completed on their new home. By controlling the full process, we are also able to work within a short escrow period of 30 to 40 days to increase the odds of getting a purchase offer accepted.
As is standard with FHA financing, the 203k loan is limited to a $625,500 ceiling and allows for down payment money of as little as 3.5%. Competitive 30-year fixed financing is offered when the purchase closes and before work begins. So borrowers avoid the need for a second “take out” loan, which is generally required on construction loans. Borrowers also have the benefit of a HUD consultant and are not required to provide expensive architectural plans to secure financing. Interest payments can also be financed for up to 6 months so that borrowers can be payment-free until ready to move into their new home. Here are just some of the unique features of 203k Rehab loans:
- Purchase and renovate with one loan.
- Competitive 30-year fixed financing.
- Down payment requirement is just 3.5%.
- Interest payments can be financed up to 6 months to avoid payments until ready to move in.
- Compete with cash buyers to purchase of any house, regardless of its current condition.
- Perfect for remodel or major construction work.
- Add a garage or (ADU) Accessory Dwelling Unit for a family member.
- Replace roof or foundation, repair termite damage, kitchen or bathroom remodel, etc.