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Four Myths About 203(k) Loans

Ameritrust-FourMyths203k-BlogDaunted by high home prices and fierce competition for prime-condition houses? An FHA 203(k) Renovation Loan could be the answer for you. It provides a simple way to bundle a home’s selling price and the cost of renovations, repairs, and improvements in one single loan.

 

Many people are still confused about how these loans work, so we’re here to explain, expose some of the myths, and set the record straight.

 

Myth #1: Renovation loans require too much paperwork.

Because these loans involve the cost of repairs, there are a few more steps to take, but you don’t have to figure it out all alone. As renovation loan specialists, we stay on top of all the regulations in your area, and we’ll walk you through each step to make it as smooth as possible. In the long run, it may be easier to get all your repairs mapped out now instead of planning and budgeting for each project on your own after you move into your house (we all know how a simple project can drag on and on). Whether you’re looking to install solar panels, add dedicated office space, or replace dated appliances with energy-efficient ones, transforming your home into exactly what you want and spreading your payment out over your 30-year mortgage helps keep more money in your pocket right now. Plus you won’t be tempted to use a high-interest credit card for materials.

 

Myth #2: It’s hard to get bids from contractors.

Renovation loans require you to get bids from the contractors who are going to work on your home. If you’ve never done that before, it can sound overwhelming, but again, you don’t have to do it alone. Our team already has a network of certified contractors that we know and trust, and each of them is familiar with the bidding process, too. When you choose this kind of loan, our experienced renovation lending team will help you through the process, making bidding easier and connecting you with professional contractors who have a solid reputation in the industry.

 

Myth #3: Processing a 203(k) loan will take too long.

If you’re in a hurry to get into your home, you don’t want to choose a loan that takes a long time to close. However, delays in renovation loans are often due to inexperienced lenders, not to the type of loan. Because we handle so many FHA 203(k) loans and work with a network of qualified contractors, we can make the process as smooth as possible, often closing renovation loans in a 30- to 45-day timeframe like other loans.

Here's the process:

  1. Find a property and make an offer.
  2. Meet with your Amerifirst 203(k) Specialist.
  3. Your property is appraised.
  4. Loan is approved and closed.
  5. Work begins on the property.
  6. Escrow funds are released to the contractor.

 

Myth #4: It doesn’t make sense to borrow all the money at once.

If you’ve been watching your money carefully to increase your credit score and save up for a down payment, you might think that borrowing more for repairs or spreading out the costs of renovations over 30 years is impractical. However, it’s important to realize that your loan is based on what your house will be worth after it’s renovated—which may be tens of thousands of dollars more than what you paid for it! By increasing your home’s value quickly, you can earn instant equity, which is one of the ways that people build wealth.

 

Also, keep in mind that in today’s market, interest rates, materials, and labor costs are all expected to climb. It could make good financial sense to lock in your projects at today’s interest rates and costs now to eliminate those variables.

If you’re considering buying a fixer-upper or a foreclosure that needs a little love, get in touch with our 203(k) renovation loan specialists! We’ll make it easy to get a home you can afford and turn it into a home you’ll love.

 

Download your free guide to learn more!Download Renovation Loans Guide

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