But hold on. It needs work, and you can’t afford to buy it and then make the repairs. So what can you do? Ask your lender about a Federal Housing Administration 203k loan.
What’s a 203k loan?
An FHA 203k loan allows you to borrow the funds for renovation costs as part of your mortgage — one loan, one closing. The amount you borrow is the sum of the home’s price and the estimated price of the repairs. You can use a 203k loan whether you want to take a place down to the studs or just update the bathrooms.
There are two types of 203k loans:
Where can you use a 203k loan?
The 203k program offers lots of flexibility. You can use it on single-family homes, one- to four-unit buildings, condominiums and even certain mixed-use situations.
Can the buyer perform the renovations?
Yes. If you can demonstrate professional expertise in the activities necessary to fix the conditions, you can use a 203k loan. However, you won’t be reimbursed for labor, only materials.
How long do I have to fix up the property?
You must begin renovations within 30 days of the closing of the loan. Although the project is subject to begin within a time frame established in the loan agreement, the total duration for the renovation must not exceed 140 days.