After you give the lender your intent to proceed they’ll order your home appraisal. This is a critical (and potentially frustrating) step in the home buying process. Let’s break down the entire home appraisal process, why it matters for the mortgage lender, and what it means for the home buyer and seller.
Before you start looking for a home in earnest, though, you should get pre-qualified for a loan. Ideally you’ll get pre-approved. To do that, you’re going to need to talk to a loan officer. What’s the difference between a pre-qualification letter and a pre-approval letter? And how can you find a good mortgage lender or loan officer to work with? Let’s break it down.
If you’re going to have a mortgage, it’s probably a good idea to understand what, exactly, that is. If you learn a little bit about the history of mortgages, not only will you come to appreciate the process, but you’ll look super smart in front of your friends at your housewarming party.
In plain english, a mortgage is a loan used to buy property. The amount of the loan is usually a fraction of the total property value. To make the loan less risky for the lender, the loan is tied to the property itself – if the loan goes unpaid, the lender takes ownership of the property, which they can sell to cover the debt.
Mortgage – n. – A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.
At some point, everyone has wanted to buy a fixer-upper, or at least considered it. There are tons of shows (Property Brothers, Flip or Flop, Flip This House, Flippa-dippa Ding Dong*) that sell the dream. Find it, rehab or remodel it, and then either live in it or flip it. Personally, I would love to find and old craftsman, buy it for cheap, put in some elbow grease and restore it to it’s former glory.
In practice though, buying a fixer-upper or remodeling a house can be difficult. A major issue is financing – construction loans are hard to get & have strict requirements.
So what can you do if you want to buy a fixer-upper but you don’t have a ton of cash sitting around? Or what if you already own a home, but you just want to remodel? There’s a loan for that – the FHA 203k loan.
A 203K loan is a specialty mortgage that is offered by the Federal Housing Administration (FHA). Often called a “rehab mortgage” or a “fixer-upper loan”, 203k construction loans were designed to help cover costs for rehabilitation, upgrades, home renovation or remodel.
203k loans are also an especially great choice for first time home buyers that want to buy a fixer-upper. It allows you to pay less for a house that needs a little love, and it provides you with extra money to renovate and remodel.
203k loans were created to solve a number of issues that come with traditional construction or home improvement loans. They make the process of getting a home remodel loan or buying a fixer upper much more simple. But why should you consider a 203k loan over a normal construction loan?