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Your Guide to the FHA 203(k) Renovation Loan Program

Your Guide to the FHA 203(k) Renovation Loan Program

by | Oct 17, 2024

Discover the Program Highlights of an FHA 203(k) Renovation Loan

FHA 203(k) renovation loan

Are you ready to turn a fixer-upper into your dream home? Whether it’s a home you’ve just bought or already own, renovation loans like the FHA 203(k) program may help you finance both the purchase and necessary repairs or updates all in one mortgage. Plus, the U.S. Department of Housing and Urban Development (HUD) announced that it is increasing the loan amount for Limited FHA 203(k) loans to $75,000 on all FHA case numbers effective November 4, 2024—that’s up from $35,000 which is huge news!

Here’s an in-depth look at how the FHA 203(k) renovation loan works, the differences between the Limited and Standard options, and what types of renovations may be covered.

What Is an FHA 203(k) Loan?

Insured by the Federal Housing Administration, the FHA 203(k) renovation loan allows homeowners to finance the cost of both the property and its renovations in a single loan. Whether you’re purchasing a home that needs updates or making repairs to your current home, this loan program may help make those dreams a reality. It offers the similar benefits of FHA loans for first-time buyers and repeat buyers alike. To qualify, eligible borrowers only need 3.5% down payment and there’s more lenient credit score requirements than other renovation loans.

Limited vs. Standard FHA 203(k) Renovation Loan

There are two types of FHA 203(k) loans—Standard and Limited. Each has specific uses and limits depending on the scope of renovations you can make.

Limited FHA 203(k) Loan

The Limited 203(k) option is commonly used for smaller repairs and cosmetic upgrades. As mentioned, the loan amount will increase to $75,000 in November 2024, an exciting enhancement that will help open the door to renovations for more people. This loan covers non-structural projects such as remodeling kitchen fixtures, replacing flooring, painting, and minor landscaping. Unlike the Standard, the Limited program doesn’t require working with an HUD consultant or have a minimum loan amount.

Common Projects the Limited Covers
  • Minor remodeling (i.e. updating kitchens or bathrooms)
  • Replacing appliances or flooring
  • Repainting or refinishing surfaces
  • Energy-efficient improvements (i.e. installing new windows or insulation)
  • Repairing roofs and gutters
Standard FHA 203(k) Loan

The Standard FHA 203(k) Renovation loan is more ideal for homes needing larger renovations and structural repairs. These may include adding rooms, replacing outdated plumbing or electrical systems, and fixing major structural issues. It has a minimum of $5,000 that must be used for renovations and the total loan amount must be within the FHA County Loan Limit. Because these projects are typically more complex, you’re required to work with an HUD-approved consultant.

Common Projects the Standard Covers
  • Structural repairs or additions (i.e. adding on square footage or fixing foundation issues)
  • Major systems replacements (i.e. plumbing, electrical, or HVAC systems)
  • Roof repairs or replacements
  • Modernization and improvements to the home’s function
  • Accessibility improvements for people with disabilities

FHA 203(k) renovation loan standard vs. limited

How Does the FHA 203(k) Renovation Loan Work?

The process for applying for an FHA 203(k) loan is similar to a regular FHA mortgage but comes with a few additional steps. Here’s an overview of how this loan program works.

  • Find a property. Whether it’s a home you already own and want to refinance* or one you’re planning to purchase, identify a property that needs renovations.
  • Get an appraisal. The home appraisal will assess both the home’s current market value as well as it’s “as-completed” value after the renovations are completed.
  • Contractor and Estimates. Work with a licensed contractor to obtain the estimated costs for the repairs and improvements.
  • Loan Application. You’ll apply for the loan based on the combined cost of the home and repairs.
  • Renovation Timeline. Once the loan is approved, the renovation funds are placed into an escrow account and work begins. The renovation timeline can typically range from six months to one year.

*By refinancing an existing loan, total finance charges may be higher over the life of the loan.

FHA 203(k) Combined with FHA 203(h) Disaster Relief Loan

Did you know that eligible borrowers affected by federally declared disaster areas may be able to combine the FHA 203(k) renovation loan with the FHA 203(h) disaster relief loan? This means adding the renovation costs into a new mortgage if your home was destroyed and deemed unlivable. Plus, the damaged property is eligible regardless of the age of the home. It only needs to have been a habitable residence prior to the disaster.

Ready to Rebuild?

At Supreme Lending, we understand how important it is to transform a home into one that truly meets your needs. Whether you’re fixing up a new property or renovating your current home, the FHA 203(k) renovation loan offers an excellent way to finance those improvements. We’re proud to offer both Standard and Limited options to fit the scope of your home projects.

Want to learn more about FHA 203(k) renovation loans or other mortgage options? Contact our team at Supreme Lending today and get pre-qualified!

 

Looking for other renovation loan options? Read more:
Mortgage Checklist: What Documents Will You Need?

Mortgage Checklist: What Documents Will You Need?

by | Oct 14, 2024

An Overview of Your Mortgage Checklist 

mortgage checklist

Ready to buy a home but don’t know where to start? We’ve got you covered with what is needed for the loan application process with this basic mortgage checklist! To qualify for a home loan, lenders will need to review several personal and financial documents during the application and mortgage underwriting process. To help streamline the process, it’s helpful to know what all you may need to provide to ensure your mortgage goes smoothly. Once you have completed the loan application and given your intent to proceed with your loan, here’s a general mortgage checklist of required documentation.

Proof of Income

Lenders need to verify that you have a steady income to make your mortgage payments. This is a key part of the loan process, and the documents you’ll need to provide include:

  • Pay stubs from the last 30 days (most current)
  • W-2s and tax returns from the last two years

Employment Verification

In addition to proof of income, lenders verify your employment to ensure you have stable job security. Be prepared to provide:

  • Employment history for the last two years, address any gaps
  • Offer letter or contract if you’ve recently started a new job

Credit History

Your credit score plays a big role in determining what loan options and rates you may qualify for. Lenders will pull your credit report to review your creditworthiness. You have options to review your credit beforehand as well.

Proof of Assets

To help determine how much you may be able to afford for a down payment and closing costs, lenders will review your financial assets. At this point in the process, the following will be needed.

  • Bank statements from the last two months
  • Investment account statements including 401(K), IRAs, stocks, CDs, money market funds, Terms of Withdrawal Retirement, profit share, etc.
  • Source of any large deposits, for example if you received mortgage gift funds or sold a large asset

Additionally, any assets used for a down payment, closing costs, and cash reserves must be documented by a paper trail.

Debt-to-Income Ratio

Lenders will review your debt-to-income, known as mortgage DTI, to ensure you can handle additional mortgage payments. This is calculated using:

  • Total monthly debt payments, for example credit cards, car loans, student debt
  • Monthly gross income including salary, investment income, bonuses, and commissions

Identification

To confirm your identity, you’ll need to provide:

  • Government-issued I.D. (valid driver’s license or passport)
  • Copy of Social Security card (SSN)
  • Residency history, typically for the last two years including landlord information for renters or a mortgage statement if applicable

Other Information Depending on Your Situation  

In addition, you may need to provide other documentation depending on your current circumstances.

These could be:

  • If paid off a mortgage in last year, need copies of the release of mortgage lien
  • If own 25% or more of business, need company tax returns for last two years
  • Divorce decree or child support order, if applicable
  • Refinance copy of note, Closing Disclosure, and survey
  • Relocation Agreement if the move if financed by employer (i.e. buyout agreement, documentation outlining company-paid closing cost benefits)
  • Insurance quote

Program-Specific Documents

For government-insured loan programs, there are a few more items you’ll be required to provide:

  • FHA: Copy of Social Security card for each applicant and co-applicant
  • VA: Original Certificate of Eligibility (COE), copy of DD214 discharge paper, and contact information of nearest living relative
  • FHA and USDA: Total household income of all borrowers moving into the new home

Preparing for a Smooth Process

By preparing yourself for a seamless mortgage process, you’re showing lenders you’re organized and ready to move forward. This preparation may help prevent potential delays, reduce stress, and have the majority of items needed to secure your dream home. Bookmark this mortgage checklist to have on-hand when you’re ready to start your homebuying journey.

If you have any questions about what documents are needed or how to get pre-qualified, our team at Supreme Lending is ready to help!

 

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Buying a Condo vs. Single-Family Home: How to Choose

Buying a Condo vs. Single-Family Home: How to Choose

by | Oct 10, 2024

Discover the Key Differences Between a Condo vs. Single-Family Home  

condo vs. single-family home

So you’ve finally decided to end the debate of renting vs. owning a home and pull the trigger on your homebuying journey. Congratulations! The next big question is deciding what kind of property you want to purchase—a condo vs. single-family home. Both options offer the potential to build equity, but the right choice comes down to your lifestyle, budget, and long-term goals.

To help you decide, here’s an overview the pros and cons of each option and how Supreme Lending may help you finance your dream home, whether it’s a condo or a single-family house.

Pros & Cons of Buying a Condo

Pros
  • Lower Maintenance. One of the biggest benefits of condo living is that most exterior maintenance and landscaping are handled for you by the Homeowners Association (HOA). If you’re looking for a lower-maintenance lifestyle where you can focus on enjoying your space without the hassle of yard work or home repairs, you may want to consider a condo.
  • Amenities. Many condo communities offer shared amenities such as pools, gyms, and clubhouses. This can provide luxurious perks without the extra cost of maintaining the amenities yourself.
  • Affordability. In general, condos may be more affordable than single-family homes. For this reason, they are a great option for first-time homebuyers or those looking to downsize. If you’re trying to buy in a competitive housing market, a condo may offer a more budget-friendly option to open the door to homeownership.
  • Location. Condos are often located in urban areas or desirable neighborhoods with easy access to dining, shopping, and public transportation. If you enjoy the vibrancy and convenience of city living, a condo can put you right in the action.
Cons
  • HOA Fees. While HOAs manage the maintenance of shared spaces and amenities, that comes with a monthly cost. These fees can add up, and it’s important to factor them into your budget when considering the overall homebuying costs.
  • Limited Privacy. Since condos are often in multi-unit buildings, you’ll likely be sharing a wall with neighbors. If privacy and quiet are important to you, this is something to consider.
  • HOA Restrictions. HOAs typically have rules regarding what you can and cannot do with your unit, from the color of your front door to controlling whether you can rent it out. While these rules are put in place to help maintain the property’s value, they may also limit your freedom.

Pros & Cons of Buying a Single-Family Home

Pros 
  • More Space. Single-family homes typically offer more living space, both indoors and out. If you need room for a growing family, pets, or hobbies, or simply enjoy having a larger yard, a house may give you the space and flexibility you need.
  • Privacy. Unlike condos, single-family homes can provide more privacy since you wouldn’t be sharing a wall with your neighbors. If peace and quiet are priorities, a standalone house may be your answer.
  • Freedom to Personalize. As a single-family homeowner without an HOA, you have the freedom to make changes and renovations to your home. Want to build a deck, repaint your exterior, or add on more square footage? You would have the flexibility to do so.
  • Suburban and Rural Living. Many single-family homes are located in suburban or rural areas. This may offer a quieter, more relaxed lifestyle away from the hustle and bustle of city life.
Cons
  • Maintenance Responsibilities. With the freedom of owning a standalone property comes the responsibility for home maintenance, repairs, and upkeep. From mowing the lawn to fixing a leaky roof, you’ll be responsible for keeping everything in good condition.
  • Higher Cost. Oftentimes, single-family homes may be more expensive than condos, both in terms of purchase price and ongoing costs such as property taxes, insurance, and utilities. Be sure to keep those additional costs in mind when deciding to buy a condo vs. a single-family home.
  • Location. While one of the perks of single-family living is being in a more suburban or rural area, that also means you may be father away from city centers. This could result in a longer commute or less access to urban amenities.

How Do You Decide?

When choosing between a condo vs. a house, here are four helpful considerations:

  • Lifestyle. Do you prefer a low-maintenance, lock-and-leave lifestyle with shared amenities? Or do you value privacy and space to personalize your property? You daily routine and personal preferences should guide your decision.
  • Budget. While condos may have lower upfront costs, you’ll need to factor in HOA fees. On the other hand, single-family homes may require more financial investment in terms of ongoing maintenance.
  • Location, Location, Location. Think about where you want to live. Do you prefer the convenience of urban life? Or do you dream of a suburban or rural retreat? The location has a direct impact on your lifestyle and commuting needs.
  • Long-Term Goals. If you’re planning to grow your family, need extra space for hobbies, or want the freedom to make home improvements, a single-family property may make more sense. But if convenience and lower maintenance are calling your name, a condo may be the right fit.

The Benefits of Homeownership – No Matter What You Choose

Whether you opt for a condo or a standalone home, you’ll still enjoy all that homeownership has to offer. Owning your own place may give you the potential to build equity and financial stability. You’ll also have the flexibility to create a space that truly reflects your personality and lifestyle. Plus, homeownership has the potential to provide long-term rewards, as your property may appreciate in value over time.

Supreme Lending Has You Covered

Ranked as a 2024 top 15 retail lender in the country by Scotsman Guide, Supreme Lending has a wide range of mortgage options to help put people into homes—whether it’s a condo or single-family. Whatever your dream of homeownership may look like, we’re here to help with your home financing needs.

Ready to get started? Reach out to our team today!

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10 Homebuying Tips for a Smooth Mortgage Process

by | Oct 7, 2024

Your Helpful Guide to Mortgage Homebuying Tips

mortgage homebuying tips

Buying a home is one of life’s biggest milestones—a place to make lasting memories, build your future, and truly create a place to call your own. But let’s face it: the homebuying process can feel a bit overwhelming at first. But with the right preparation and guidance, you can navigate your mortgage smoothly and confidently. Whether you’re just thinking about purchasing a new home, buying for the very first time, or a seasoned pro, these 10 mortgage homebuying tips will help you make sense of the process and set you up for success.

1. Save for a Down Payment Early

One of the most important mortgage homebuying tips is saving for a down payment. While some loans may require as low as 3-5% down, the more you have saved, the better. A larger down payment also means a lower loan amount and reduced monthly payment. Working with your local lender early on in the process can help you plan for how much to save for.

2. Don’t Wait to Get Pre-Qualified

Before you even start house hunting, the first step in the homebuying process is getting pre-qualified for a mortgage. Pre-qualification gives you an initial idea of how much you may be able to afford based on information you provide to your lender, including your assets, income, and credit score. Getting a mortgage pre-qualification or pre-approval can also show sellers that you’re a serious, capable buyer.

3. Compare Loan Types

Not all mortgages are the same, so it’s important to understand your options so that you can make an informed decision when it comes to financing your home. Whether it’s a Conventional, FHA, VA, or USDA loan, each comes with its own set of guidelines and down payment requirements. There are also several alternative financing programs including a jumbo loan, bank statement loan, and investment property loans.

4. Explore Down Payment Assistance Programs

Do you know about down payment assistance programs that may be available? These programs are designed to help more people become homeowners with affordable options and flexible guidelines. Depending on the program, assistance can be offered through grants, forgivable loans, deferred payment, or tax credits. Don’t hesitate to ask your lender about these potential opportunities, as they may make a big difference in your homebuying journey.

5. Have Your Documentation Ready

When it comes time to apply for your mortgage, you’ll need to provide a variety of documentation so that your lender can verify your income, employment, and creditworthiness. Common documents include pay stubs, tax returns, bank statements, and W-2s. Having these ready may help speed up the process and avoid delays.

6. Know What’s Included in Your Loan Estimate

After you apply for a mortgage, you’ll receive a Loan Estimate (LE). This document provides you with important information regarding your mortgage application, including the estimated principle payment, interest, taxes, and insurance—also known as your mortgage PITI.

7. Prioritize Both an Appraisal and Home Inspection

During the mortgage process, it’s crucial to understand the appraisal and home inspection—and why you should opt to do both. The appraisal is an assessment of the home’s value that most lenders require. This helps confirm that the loan amount aligns with the property’s market value. Meanwhile, the home inspection evaluates the property’s condition and systems. A home inspector can identify any potential repairs or issues, such as roofing damages, electrical problems, or structural concerns.

8. Avoid Large Purchases or New Credit

It’s also important to hold off on making any large purchases or opening new lines of credit during the mortgage approval process. Big expenses like buying a car or furniture, or applying for a new credit card, may affect your credit score and debt-to-income (DTI) ratio. To keep your loan approval on track, avoid major financial moves until after you’ve closed on your new home.

9. Understand Costs Beyond the Down Payment

While the down payment is a big part of the homebuying process, don’t forget about the additional costs involved in securing a mortgage. Beyond the down payment, you’ll need to consider closing costs, which are other fees to process the loan that typically range from 2-6% of the loan amount. Another potential expense is mortgage insurance, which is required for FHA loans and if your down payment is less than 20% for Conventional.

10. Review the Closing Disclosure

Before officially closing on your home, you’ll receive a mortgage Closing Disclosure (CD). This document provides a transparent summary of all loan details, including terms, projected payments, closing costs, and a transaction summary. Lenders are required to provide your disclosure no later than three days before your scheduled closing. Be sure to carefully review all information to ensure it’s correct to avoid any potential delays.

Supreme Lending Is Here to Help

As you can see, the homebuying process has a lot of moving parts. Keeping these mortgage homebuying tips in mind will help ensure your loan experience is a smooth one.

At Supreme Lending, we’re here to guide you every step of the way. Want to learn more about our mortgage services or ready to start your homebuying journey? Contact your local branch today!

3 Common Condo Loan Myths – It May Be Easier Than You Think!

by | Oct 7, 2024

Don’t let these condo loan myths get in your way of homeownership!

condo loan myths

Condominiums can be an appealing alternative to traditional homes, offering perks like lower maintenance, community features, and prime locations. However, some potential homebuyers may hesitate to pursue applying for a condo loan, often due to misconceptions that it’s more challenging to secure a mortgage than a single-family home.

While getting a condo loan involves a few additional considerations, it isn’t as daunting as it may seem. With the right lender on your side, you can move through the process smoothly and confidently. At Supreme Lending, our dedicated condo team specializes in handling all the details. This will ensure your loan process is seamless from start to finish.

How Condo Financing Differs

When you apply for a mortgage on a single-family home, the lender’s primary focus is on your financing qualifications and the property itself. Condo financing, on the other hand, involves an additional layer of approval—not just on the individual unit but the overall condo complex. Lenders will review factors including:

  • Homeowners Association (HOA). The financial health of the condo association and the condition of the property are evaluated to ensure the community is well-managed.
  • Occupancy Rates. Lenders may require a certain percentage of units to be owner-occupied to reduce potential risks associated with high rental occupancy.
  • Legal Status. The lender will also ensure there are no legal issues or disputes involving the condo association that may impact the financing process.
  • Insurance Coverage. There are specific insurance requirements for the building and the association, which lenders review as part of the approval process.

These steps may add some complexity but are designed to protect both the buyer and lender. Now let’s debunk these common condo loan myths.

Myth #1 – Condo Loans Are Too Complicated

Condo loans may involve a few more steps than financing a single-family home, however they’re not as complicated as you might think. When you apply, you’ll provide basic details about the condo property, including the address. Then our specialized team at Supreme Lending will take it from there to review the complex. In some cases, you may even qualify for a limited review, which requires less paperwork and verification.

Myth #2 – Condo Underwriting Takes Took Long

The underwriting for a condo loan involves reviewing the financials, insurance, and rules of the condo’s Homeowners Association (HOA) to ensure the property is solid. While it may seem like more work, Supreme Lending’s condo team is quick to keep the process moving, helping to avoid any delays and keeping things on track.

Myth #3 – Condo Financing Is Riskier for Buyers

Some homebuyers may worry that getting a condo loan is riskier than financing a traditional home because of the HOA and shared ownership. In reality, the detailed review process can give buyers peace of mind that their condo community is financially stable and well-managed, so much so that their lender approved the condo loan.

Ready to Finance Your Dream Condo?

We’re here to help! There’s a reason why Supreme Lending offers such a wide variety of loan programs, including condo financing. Don’t let these condo loan myths hold you back. Contact us to get started today.

 

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