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If you want to buy a fixer-upper or renovate a home using an FHA 203(k) Rehabilitation Loan, there are some issues affecting your loan that you might not expect when you start planning and saving for your loan.

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Considerations When You Renovate Your Home

November 3, 2022

Considerations When You Renovate Your Home
If you want to buy a fixer-upper or renovate a home using an FHA 203(k) Rehabilitation Loan, there are some issues affecting your loan that you might not expect when you start planning and saving for your loan.

Yes, there are plenty of obvious decisions to make--which lender, whether or not to pay discount points on the loan, who should do the contracting work, etc. But there are other important choices. When you renovate your home, the first choice to make is related to how extensive the repairs are going to be.

Do you want a Limited FHA 203(k) loan for smaller projects that don’t affect load-bearing structures? Or do you need a full 203(k) loan to do more complex renovations?

That’s a basic set of initial choices. After that you will need to decide on things like the quality of the carpets, windows, fixtures, and other choices.

Quality, Price, and Your Budget

Upscale? Midrange? Budget? Pricing out these features may be tricky if you aren’t used to running the numbers, which is one reason why it pays to start planning earlier than you think you need to.

When choosing features in the home to replace those that will be de-installed during the renovations, at least some consideration will go toward your budget. You might choose more basic features (in the laundry room, for example) in favor of mid-range necessities in other parts of the home such as better windows and carpets. 

And regardless of whether loan funds pay for those things or the money comes out of your personal budget for the home, you should still give serious thought to those expenses. 
In some cases contractors could offer you a package deal on more extensive renovations. In general, choosing the midrange option may be a smart idea, especially in high-traffic areas that have greater visibility in the home.

Outside the House

The home’s exterior is another issue. Do you have to replace siding as part of your 203(k) renovation project?

Do the math on replacement timeframes for your options. If midrange siding lasts longer than budget siding, it is fair to consider the added expense in exchange for a longer window of time before you have to replace the siding.

Some of these considerations are based on price and replacement time alone but others may be a matter of aesthetics, durability, or a combination of all these factors. It always pays to shop around; shopping around for a lender and a contractor are both equally important for these types of loans, you should give yourself as much time as needed to find the right fit for your project.

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