May 3, 2019
If you are considering a rehab real estate project there are some things you should know about the different financing options available to you. Some renovation projects may qualify for a unique type of loan, known as a 203k loan, or a rehab loan. But how is a 203k loan different than other traditional loans? When is it preferable to a traditional loan? Let’s look at some facts about rehab loans and whether or not they are right for your property.
Loans for Renovation Projects
203k loans are intended for renovation and rehab projects because they allow buyers to roll the purchase price of the home as well as the renovation budget into one loan. Instead of obtaining a loan for the purchase price of the home as well as a separate loan for the renovations, this allows the buyer to have just one loan and one mortgage payment. This type of loan is a great option for buyers who are purchasing a property that needs extensive work or major renovations to be livable.
Funding for Contractors
In a 203k loan contractors are involved in the approval process because they will receive the renovation funding, rather than the homeowner. Because of this contractors are involved in the application and approval process, because they can give estimates for the cost of work which will be necessary for the loan.
Getting Loan Approval
203k loans are obtained in a similar manner to a regular FHA loan, but with some additional requirements. Because the loan includes renovation money contractors are involved in the application process. Because the loan involves additional money for a renovation it also has a more complex market analysis and appraisal than a traditional loan. In these cases the appraiser wants an analysis of not only the current value but also the renovation cost and the post renovation value.
Rehab loans, or 203k loans, can be a great option for buyers looking to renovate a piece of property. Because these loans are different than traditional loans they do require a good understanding of how they work as well as more preparations in getting loan approval. If you are considering a rehab property call us at Maryland Private Mortgage today to discuss if a 203k loan is a good option for you. To speak with an expert on rehab loans in Baltimore county, call us today!
The Maryland Private Mortgage Lending Team