The 203k Loan: What to Know and How to Get It
The real estate market in New York is currently saturated with buyers, which means the choice properties for sale are flocked with competitive offers. One strategy to avoid competition and get a house for a low price is to get a fixer-upper, or a house that needs a few repairs and renovations before you can move in.
It might seem counter-productive, buying a cheap house only to shell out more money for its rehabilitation. But if you have a good eye for deals and a good real estate agent to help you assess your options, you could end up owning property for less cost.
But that’s not to say all fixer-upper homes are cheap, and you may still need to apply for a loan. Not all banks and lending companies may be keen on offering traditional mortgages for properties in need of repair. This is where the 203k loan for New York properties comes in, and here’s how it can help you.
What Is a 203k Loan?
The 203k loan is a type of mortgage given to borrowers interested in buying a home in need of repairs. Backed by the Federal Housing Administration (FHA), this loan is also known as a Rehab Loan or FHA Construction Loan.
When a house is in need of major repairs, some lenders may not approve loans. This makes it difficult for buyers in search of fixer-uppers to get reasonable financing if they’re looking for a regular mortgage. A 203k loan, however, will cover both the costs of buying the house and having it repaired.
However, this loan does not cover all fixer-uppers. The home in question has to be potentially livable and meet certain safety standards. If it’s in very poor condition and does not meet the standards set, you may not be approved by lenders that offer 203k loans.
Benefits of Getting a 203k Loan
There are several benefits from getting a 203k loan.
The FHA only requires you to pay for a 3.5 percent down payment, the rest to be shouldered by your loan. This percentage includes the price of the home and the total cost of rehabilitating the property. Unlike traditional mortgages that usually require 10 to 20 percent down payment for a mortgage, this requires less savings on your part, meaning you can go shopping for a fixer-upper for less.
For those looking at home buying as an investment, buying these types of houses can be a good opportunity for house flipping. House flipping is the practice of buying property for a cheap price (usually fixer-uppers), conducting repairs and renovations, and then putting it back on the market for a higher price. Getting a 203k loan is a good way to finance the costs of buying and rehabilitating a home.
Lower Interest Rates
The FHA is part of the federal government, which means you can get lower interest rates compared to acquiring different types of mortgages from other lenders. Since the FHA protects the lender from loss, this translates to lower interest rates that lenders can provide to you.
Where to Get a 203k Loan
Not all banks, lending companies, and other mortgage lenders offer 203k loans, so it’s best to shop around your area to find available lenders that offer them. You can also consult with your real estate agent to shop around for mortgage lenders that can give you the best price.
Consult with Us Today
A 203k loan may be the best possible option for the property you’re looking to buy in Central New York. Buying a fixer-upper property may be the best option, whether you’re looking for a house to live in or considering residential property as an investment opportunity. Getting this type of loan means lower interest rates, smaller down payment requirements, and better equity for you.
So, if you’re interested, talk to our team at Procopio Real Estate. We help our clients every step of the home-buying process – from pre-approval down to the closing process. Our trusted partners can give you the loan you need to get a fixer-upper and turn it into your very own dream home.
Get in touch with us today to find your own home in New York.