I often get calls from people who say they don’t have enough equity in their home to get a line of credit. They go online to see if there’s any solution, and they find my website. I’m happy to inform them that, yes, they do have options. A FHA 203k will suit their needs.
They’re surprised to learn that they can use a FHA 203k loan to refinance a property and roll in the cost of rehabilitation and renovation. That’s actually one of the best aspects of the loan.
One of the great things about this program is the fact that you need only about 5 percent equity in a property in order to do this type of refinance. The 5 percent is from the as-is value, and any repairs on the property will create an after-improved value (which has to be supported by the area).
You should keep these two values in mind when doing a FHA 203k: the current value, which determines the initial equity; and the after-improved value, which is the instant equity you get once the repairs on the property are complete.
This is a wonderful option for people who thought they were stuck with homes in their current condition. It allows them to stay in their homes while making needed improvements.
And those eligible improvements include a wide range of projects. Anything from finishing a basement to installing a new bedroom or bathroom (adding square footage in the process). Such projects add greatly to a home’s value.
So remember — you’re not trapped in a home that needs repair. A 203k is the solution.