Homebuyers that are interested in learning how to apply for a 203k loan should know that there are a number of conditions that must be met for the purchase to qualify for these types of loans. Although the conditions for the qualifying purchases are not stringent, they are still specific enough that it is important for the buyer to know what these loans can be used for and what they cannot be used for. Homes and repairs must meet these conditions to be paid for under the Homepath or 203k loan program.
Types Of Homes
203k loans are used to purchase a primary residence in a state of disrepair that requires home improvements to bring the home up to code for habitation. These loans are intended for owner-occupants, not investors. Eligible properties that may be purchased using these loans include single-family to four-family dwellings, existing constructs that have been completed for at least one year, homes that will be torn down with part of the existing foundation remaining, homes that will be moved to a new foundation, the residential portion of a mixed-used property, or a condominium approved by the Federal Housing Administration.
Conditions For Financing
There are certain conditions that the home must meet to be eligible for Homepath financing. The U.S. Department of Housing and Urban Development (HUD) “requires that properties financed under this program meet certain basic energy efficiency and structural standards” to “comply with HUD’s Minimum Property Standards and all local codes and ordinances.” Energy efficiency standards include caulking, insulation, ventilation and using the correct size heating and air conditioning systems for the home. Other requirements include having smoke detectors adjacent to each sleeping area.
The wide variety of home repairs and improvements that are eligible for payment under the 203k loan program is surprising. Buyers can use the loans to pay for painting, adding decks or patios, remodeling the bathroom or kitchen, finishing the attic or basement, or upgrading the home’s HVAC system. The loans may also be used to eliminate lead-based paint problems, energy conservation, disabled access, or replacing the siding of the home. In homes with structural issues, the loans would pay for structural alterations and repairs, site grading and drainage, and repairing plumbing, roofing, or flooring. “Luxury items,” such as tennis courts, swimming pools, hot tubs and barbecue pits, cannot be financed with a 203(k) loan. Talk to your lender about the specific improvements you want to make to see what can be financed with the loan.