Colorado Green Real Estate

Using the FHA 203k Renovation Loan to Purchase a Home and Make Green Improvements

I recently attended a workshop sponsored by Academy Mortgage about Federal Housing Administration (FHA) 203k Renovation Loans. The workshop opened my eyes to a number of possibilities that could greatly benefit home buyers. In this two part blog post, I’ll share with you a few of the key take-away points I learned about. Part one describes the 203k loan and the type of renovations allowed. Part two will describe the two different 203k loans, how they work and the added benefits of using a 203k loan to make green renovation improvements.

What is a FHA 203k Renovation Loan?

The FHA 203k is a loan available through the FHA mortgage insurance program that enables home buyers to purchase or refinance their home with a single loan that includes renovation and repair costs. This is a huge benefit to home buyers because the end result is most often a much nicer home they could purchase otherwise. The added benefit is the home is renovated to their specification which gives it a newer and much more personal feel. FHA 203k renovation loans may also be used with the purchase of HUD homes. For home buyers seeking a healthier, more comfortable and cost-effective home the 203k is an excellent way to renovate their home to include green features and benefits.

Of course, there are guidelines to follow and the process must be adhered to for maximum benefit. Home buyers must be able to envision the changes and willing to endure the time needed to complete the repairs. Patience and attention to detail are key ingredients to the whole process. But the time and effort required can be well worthwhile.

In today’s real estate market, if a home buyer is willing to be patient and follow the guidelines, they can purchase a home that needs repair, sometimes at a bargain price, and fix it up to create equity in the property almost immediately. This can be especially benefickal for first time home buyers. Academy Mortgage and Universal Lending are two well known national lenders with extensive experience in processing FHA 203k Renovation Loans.

What type of renovations is allowed?

Renovations may include small or big jobs including full remodels. Condos, town homes, manufactured housing, single family and most owner occupied 1-4 family mixed use properties. Almost any kind of renovation or repair can be financed including structural improvements, changes or additions. A partial list of allowed renovations includes:

• Kitchen and bath remodels
• New siding or roof
• Painting, landscaping
• Eliminate health or safety hazards such as lead based paint or mold abatement
• Add a garage, sun room, deck or finish out a basement
  
• Energy efficient improvements including insulation, furnace, windows, etc.

In part two, I'll review the process invloved and the added benefits of using a 203k loan to make energy efficiency and other green improvements.

John Thomas MEEE, MBA

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