San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

A San Diego FHA 203(k) Construction mortgage loan is a fantastic way to either buy your next home and/or refinance your existing FHA mortgage to pay for construction costs. 

I wanted to compile a list of the most commonly asked questions. 

Keep reading - and, if yours isn't answered contact me and I will add it to the list.

Q: Can I use a 203(k) loan to purchase a house?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

Yes and no.

A 203(k) loan can be used to purchase a home and fund repairs to the home that isn’t up to standards that make it livable.

However, a 203(k) loan cannot be used to purchase a house that is already livable without making renovations to it.

You can pull out a 203(k) at the same time that you get a mortgage loan if you are intending to do renovation immediately.

You can even pull out a 203(k) loan at any time to renovate your home, though.

It isn’t necessary to pull out a 203(k) loan at the same time as you purchase a house.

Must Read: San Diego FHA 203(k) Mortgage Loans - Rates, Terms, Limits...

Q: How big of a house can I renovate with a 203(k) loan?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

The largest house you can renovate with a 203(k) is a four-unit home.

Even if you want to renovate a larger home unless it will wind up as a four-unit home.

This is line with the fact that you can only purchase up to a four-unit with an FHA mortgage loan.

Q: Why would I want a streamlined 203(k) loan instead of the standard one?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

If the renovations that you are considering are $35,000 or less, then the streamlined 203(k) is going to be just right for you.

The process of a streamlined 203(k) is a lot easier than the standards.

There is a lot less paperwork involved in the streamline loan as well.

This will be nice for someone that doesn’t need to complete an extremely major project.

There are specific projects that you will not be able to do with a streamline’s restricted list, but most projects are still covered under the streamlined loan.

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Q: Do the loan limits for a 203(k) differ from regular FHA loans?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

The basic loan amounts do not differ.

There are different ways that the actual loan amount can be calculated based on the LTV ratio of the home and the After Improved Value of the home.

However, the limits for the loan will remain what they are for a normal FHA mortgage loan.

Living in San Diego means that real estate prices are higher and the loans available through the FHA reflect that.

For the more advanced calculations and understanding what you might actually get as a loan, I’ll be able to talk to you in more detail about what you’ll end up looking at for a loan.

Q: Can I refinance my FHA loan into a 203(k) in order to “cash-out”?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

No.

This is prohibited by the 203(k).

All the funds that are received from this loan type, whether it is streamlined or the standard, have to be used for the purposes of renovating the house.

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Q: Are the requirements different for 203(k) loans and typical FHA mortgage loans?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

They are roughly the same.

Because the 203(k) loan is still an FHA-backed loan, this loan is typically intended for those with lower income.

This means that you will have to prove income and citizenship in the United States.

However, this also means that your credit score doesn’t have to be incredibly high in order to qualify.

Typically for a 203(k) loan, a credit score of 580 or higher will qualify you for the loan.

As with FHA mortgage loans, the 203(k) is only for houses that are one to four units.  

Unless you are taken a larger building and turning it into a four-unit home, then this loan will not be able to help you with your renovations.

San Diego Homeowners: We have qualified buyers desperately seeking to buy immediately and pay top dollar...

For many people that are looking at home renovation, you may be over-qualified for this loan.

If you find yourself over-qualified, then you may be able to look at another back to find a loan with better rates and a better term.

If you want to check the rates for any kind of mortgage, then I would suggest using my tool to make sure that you’re getting the best rate possible.

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Q: Can I refinance my FHA mortgage loan into a 203(k) so that I can repair the home?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

Yes, you can.

What lenders will want to remind you of is the fact that you cannot use this refinance as a way to cash out.

All of the money available from a 203(k) is intended to be used for home renovation.

You will be unable to pocket any of the money.

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Q: Can I use a 203(k) to move a house to a different property?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

Yes.

This is actually one of the many purposes which make people consider a 203(k).

If you find a house that you really like, you can use the 203(k) to get the house there and then renovate it once it is on the property that you want.

Q: What is the difference between a streamlined 203(k) and a standard 203(k)?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

The difference between a streamlined and standard 203(k) is really about the amount of money you can get and the amount of paperwork that it will take to get there.

You will only be able to get up to $35,000 with a streamlined loan.

The standard loan uses the FHA loan limits.

Which is best for you depends on the kind of renovations that you’re doing and how much they’re going to cost.

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Q: Why would I want a 203(k) loan when looking to purchase a property?

San Diego FHA 203(k) Construction Mortgage Loan Q and A (2019 | 2020 Update)

If you find a property that looks a little ragged but it’s in the right space, then you want to look into a 203(k) loan.

It isn’t something that you necessarily have to do when you’re looking for a house.

It can be a great option for someone that doesn’t mind doing some construction in order to transform an okay house into something that is much more amazing.

Just remember that all the money from your 203(k) goes into the house and the renovations that you are doing.

What do you think?

Leave your thoughts below - or, text/call me at (760) 297-4539

Your 203(k) Insider, 

Scott

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