A real fixer-upper! Photo by David Jones

It’s an attractive idea – to buy a fresh new home, built exactly to our standards that we can move straight into and live in straight away without having to make any changes at all. But that’s rarely the reality, and most of us would have to admit we enjoy the challenge of moving into a new house and putting our own personal stamp on it to really make it our own.  And you might be one of many buyers that loves the challenge of buying what realtors call a ‘unique fixer-upper opportunity’. (Read: a run-down wreck).

But this can be fun too. Can you see the potential in a derelict shell to become your dream home? There’s just one problem: the bank won’t lend you the money to even buy the house, let alone fix it up! But the government has a great solution in the form of a 203k loan.

A Helping Hand

A 203k loan is basically a home improvement loan for single family properties. Because of the risk that is involved with buying land or properties that require extensive renovation, many lending institutions consider these loans to be too high risk. But a 203k loan is acquired through a list of institutions where the government backs the loan, making it a less risky investment and encouraging institutions to lend more easily.

What Do I Need?

Your cash investment breaks down to 3.5% of the purchase price plus the estimated cost of repairs. So, if you’re buying a $150,000 property with repair costs of $15,000, you would require 3.5% of $165,000 – which comes out as $5,775. That means your own outlays are minimal and you get a great return on your investment to completely renovate your property.

Of course 203k loans have the same credit checks and criteria that come with any loan, so you must be able to make monthly repayments and have a good enough credit history to qualify

Which Loan Is Right For Me?

There are two types of loan: regular and streamlined (sometimes called ‘modified’).

A regular loan is the most common type, and this is for properties where you need to carry out structural repairs. A streamlined loan is for non-structural repairs, so in essence is reserved for home improvement and renovation purposes.

You’d be surprised just how many home improvement plans are included in the 203k loan scheme, and there are plenty more ins and outs to find out about, so speak to your local realtor and don’t forget to check our site for home improvement ideas.