Houston Chronicle

FHA loan can help buy, renovate a fixer-upper

- By Amy Fontinelle INTEREST.COM

Q : How can I borrow enough money to buy and renovate a fixer-upper? A : Consider financing your new home with a 201(k) mortgage backed by the Federal Housing Administra­tion. The two permanent types of FHA 203(k) loans will provide enough money to make the purchase and rehab the property. The regular 203(k) loan is for almost any kind of repair or improvemen­t — even the reconstruc­tion of a demolished home, as long as the original foundation remains.

You can borrow more than the home is worth, as long as the repairs will increase its appraised value.

The most you can borrow is 110 percent of what an appraiser estimates it will be worth after renovation­s, or the cost of the home plus the estimated renovation cost, whichever is less. At least $5,000 of what you borrow has to go toward renovation­s.

The maximum also must fall below the FHA mortgage limit for the area — $271,050 for single-family homes in most parts of the country up to $625,500 in high-cost areas.

The Streamline­d 203(k) mortgage is for projects that don’t require plans, consultant­s, engineers or architects — in other words, no structural modificati­ons such as adding rooms.

You can use one of these loans to repair or replace: Roofs, gutters and downspouts Decks, patios and porches Heating and cooling systems Windows, doors and exterior siding Plumbing and electrical systems Flooring It can also be used to remodel your kitchen and get new appliances, to finish your basement, to paint your home and to add insulation and weather-stripping.

You can borrow the purchase price plus up to $35,000 for repairs, improvemen­ts and upgrades. There is no minimum repair amount.

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