Q: I've just inherited a small home that needs a large amount of renovation.Fixing this place is not in my budget, but I need to get started. Any suggestions for how to pay off the small mortgage owed on the place and fix it up?
A: The Federal Housing Administration has a program that lets you buy or refinance a home and include financing for repairs. In your case, you would apply for a refinance mortgage under the FHA section 203(k) program. This loan is provided by FHA-approved mortgage lenders. Your maximum loan amount is based on the estimated value of your home AFTER repairs.
Depending on your location and the condition of the home you're renovating, you may be eligible to combine FHA 203(k) financing with local and state loan and grant programs designed for revitalizing neighborhoods. Program requirements and availability vary; FHA lenders, community housing agencies and state housing finance agencies can provide more information about the availability of these programs.
FHA 203(k) Loan Finances Home and Renovation
Traditional mortgage programs require property to meet applicable zoning and building codes before a home loan is approved. If the home isn't up to code, it must be repaired. This creates a Catch-22 for those who need a loan before they can afford to make repairs, but they need repairs to get the loan....until FHA saves the day.
FHA 203(k) mortgages provide funds needed to acquire or refinance single-family homes and renovate them. Single-family homes include one- to four-unit homes.
You can solve your problem by refinancing the small mortgage you have with an FHA 203(k) mortgage. You'd pay off the old mortgage and make required improvements. FHA 203(k) mortgages cover many structural repairs and improvements, but restrictions do apply.
Contact LendingTree's network of FHA approved lenders to learn more about the FHA 203(k) program and to request and compare mortgage quotes.