Room Additions in Phoenix:Using a FHA 203(k) Loan
If you’re interested in new room additions in Phoenix but may be a little short on cash, a little-known way to get the money may be available. It’s called a FHA 203(k) loan and is provided by the federal government. The loan is basically used for people who want to purchase and rehabilitate or renovate a damaged home for their primary residence.
The government endorses these loans so lenders won’t have to assume all the risk. You can buy a home badly in need of rehabilitation and get the government to help you assume a loan to pay for the work. Many properties on the market have not been properly maintained, including some foreclosures and former rental units that have seen better days.
When these homes are bought and fixed up by the new owners, neighborhood eyesores are eliminated and property values might see a boost. All types of renovations can be done using the FHA 203(k) loan, including new room additions in Phoenix.
What Properties Qualify?
FHA 203(k) loans are targeted to owner-occupied residences. In other words, investors aren’t eligible for these loans. Properties that qualify include single-family houses, multi-family dwellings up to four families, existing construction completed at least for one year, homes that have been torn down but still have the existing foundation, residences in mixed-use properties and FHA-approved condos.
How Much Money Can You Get?
The FHA 203(k) loan lets you incorporate the cost of renovations, including new room additions in Phoenix, into the loan. This amount includes materials and labor. For example, if you buy a home with the kitchen gutted, you can add the cost of cabinets, countertops, flooring, appliances, sinks and all associated costs to design and install the new kitchen.
The maximum loan amount you can take out is the lesser of the as-is value of the property plus the renovation costs or 110 percent of the home’s value after the rehabilitation. You can also add 10 to 20 percent contingencies for cost overruns.
And, you also may be eligible for up to six months in mortgage payments while you are renovating your new home, given you can’t live there until construction is finished. This loan feature helps buyers avoid having to pay two mortgages.
Eligible Repairs and Renovations
The list for what’s eligible for the FHA 203(k) loan is surprisingly long. Typical projects like kitchen remodeling, bath remodeling, painting, site work, roofing, siding and more included. But, also on the list are new room additions in Phoenix.
Homeowners might not expect the variety of projects covered in the FHA 203(k) loan, especially new room additions in Phoenix. Not only does the loan include room additions, but it also allows for new decks and patios, finishing an attic or basement, adding or eliminating the number of units in a multi-family dwelling and second-story additions.
The requirements for all projects, including new room additions in Phoenix, are they meet energy efficiency and structural guidelines established by the Department of Housing and Urban Development. For example, new room additions in Phoenix must have proper caulking, insulation, ventilation and use the appropriate heating and air conditioning systems.
All repairs and renovations, including new room additions in Phoenix, must be completed within six months. Your FHA 203(k) loan proceeds are placed in an escrow account and distributed as work is completed. The Department of Housing and Urban Development must approve the final construction.
Although a FHA 203(k) loan requires more time and red tape, the inconvenience can certainly pay off. This loan can make it possible for you to buy your dream home, and then renovate it to even include new room additions in Phoenix. With the right home selection, you can come out ahead both financially and with the perfect home for your lifestyle.
For additional information on new room additions in Phoenix or FHA 203(k) loans, contact Republic West Remodeling today.