The FHA 203k home improvement loan is an attractive loan to many people. Why? This is because it provides homebuyers the chance to get a mortgage that also still covers their home’s repairs, renovations, and more as part of the initial loan.
That said, as with any other loans out there, if there are upsides to a loan, there are also downsides. These are important to know when hunting for any loan to help you pick the right loan that meets your expectations!
So, with that out of the way, let’s talk about the pros and cons of an FHA 203k home improvement loan:
The Pros of an FHA 203k Home Improvement Loan
FHA 203k home improvement loans are a great option for homebuyers looking to get a new home and also make some upgrades to the property. Here are a few benefits of the FHA 203k home improvement loan:
1. Helps with Big Home Improvement Projects
With any home improvement loan, the biggest benefit is that you can make those big home improvements that are beyond your budget with a simple loan. It basically allows you to take on home improvements that you couldn’t normally afford at one time.
For example, if you’re in the market for a new home and would like to have a new roof, new bathroom, and some new windows, a home improvement loan would be able to do all of that.
2. Allows You to Own More Homes
It speaks for itself. If you’re in the market for a new home and only have $200,000, but you really want to get a house that costs $225,000, the 203k home improvement loan is a great way to take on the extra $25,000 without getting a new loan.
3. Interest Rates Are Lower
In general, home improvement loans are typically a bit lower than a typical mortgage. This is due to the fact that you’re using the loan to do a home improvement project, and that’s where the loan is being used.
So that said, it’s common for home improvement loans to have a lower interest rate, which for most people is a bonus.
The Cons of an FHA 203k Home Improvement Loan
Like everything else, an FHA 203k home improvement loan has a few disadvantages to it. Here are a few to keep in mind:
1. A Poor Credit Score Isn’t Helpful
It will be difficult to get any regular mortgage with a poor credit score, no matter how much you make. So, to get a 203k home improvement loan with a poor credit score will be very, very difficult.
So, while you can get a home improvement loan with a poor credit score, it might be difficult to get a loan, specifically one that covers repairs, renovations, and more.
2. More Paperwork Involved
Like most home improvement loans, there is a lot of work involved with the FHA 203k home improvement loan. Since the loan is being used for home improvements, there are paperwork and forms that need to be filled out for the loan, making it not the easiest loan to get, especially if you’re in a hurry.
3. You Might Not Qualify for the FHA 203k Loan
Unfortunately, not everyone will qualify for an FHA 203k home improvement loan. This is due to the fact that the FHA 203k home improvement loan has different requirements than a typical mortgage. This includes getting a professional appraisal and inspection done on the home you are looking to buy.
The FHA 203k home improvement loan is a great option for people who are in the market for a new home and want to do a few upgrades and repairs to the property. Really, its two-in-one solution makes it a great loan to get that will overall make it easier for you to access the money you need to build and renovate your home! That said, always consider the cons as well to ensure that you are making the right choice in this vast landscape of loans.
Clayson Mortgage is a mortgage broker that works for you, helping you find the best loans you need to own your dream home. If you are looking for a 203k loan in Utah, reach out to us today!