If you are planning to buy a fixer-upper, you may have already found that it can be very tough to secure financing for a home that needs work. This is because Norwich, CT lenders do not want to make a loan on an uninhabitable property, and many government-backed loans require the home to be in livable condition.
One of the best ways to buy a fixer-upper in Norwich, CT is through an FHA 203k loan. This unique loan is designed to borrow for the improvement and purchase of a home with a single mortgage. FHA 203k home loans are meant to encourage lenders to offer financing for properties that may seem risky in an attempt to revitalize neighborhoods.
You can choose between two types of FHA 203k home loans: the regular loan option or the streamlined version. The regular 203k loan has a maximum loan amount of the as-is value of the home with repairs, or 110% of the home's estimated after-repair value, whichever is less. With a Streamline FHA 203k mortgage in Norwich, CT, you can get a loan for the purchase price of the home with up to $35,000 in repairs.
You can also choose between a fixed-rate or adjustable-rate loan, and a term of 15 years or 30 years. Rates for 203k loans in Norwich, CT are slightly higher than regular FHA mortgages, but this type of loan is usually the best and most affordable way to buy and repair a fixer upper.
It is not just the borrower who must qualify for an FHA 203k loan; the Norwich, CT property must also qualify under the program. You must plan to live in the property as your primary residence. If you get the regular 203k loan, the home may need structural repairs, but only non-structural repairs are allowed with the streamlined version.
The FHA has many guidelines as to which repairs are required with a 203k loan. Your Norwich, CT lender may also have rules about repairs. Items that are allowed under this loan program include the following:
You can choose to include the cost of labor in your 203k home loan -- even if you do the repairs yourself. Make sure you understand that all work must be completed within six months.
The FHA 203k mortgage is usually the best option if you want to buy a home in Norwich, CT that needs work, as you can finance both the purchase and repairs into a single loan. This loan option typically has competitive rates as well as a low down payment requirement.
The main downside to the program is not all repairs and properties qualify. Not all lenders in Norwich, CT offer 203k home loans, either, and you will find the loan approval process is more complicated. This is because you must give a detailed proposal of work, show how much the home will be worth, and complete all repairs within six months.