The difference between a streamlined and standard 203k loan
A 203k loan can be the key to improving your home's value, but it's designed to so more than that. The 203k loan is granted by the FHA in an attempt to revitalize run-down neighborhoods. If you're wondering how to choose the right type of loan for you, consider the following differences between the two options: the streamlined or standard loan. Just be warned that when you make all the improvements, you'll need to let your home insurance company know about all the fabulous changes.
Before diving into the differences, it helps to consider the similarities. Both the streamlined and standard loan require a credit score of at least 640. You'll also need at least 3.5 percent of the total cost of repairs. Some people take this loan out at the time of buying the property, while others wait until they're ready to make the improvements.
The interest rates for both loans will depend on a person's credit history, but these loans average 1 percent more than a typical home loan. (This rate is far better than most home repair loans.) Not everyone will be approved for a 203k loan — as they're typically only granted to those in certain neighborhoods or areas. However, the benefits are worth doing a little research to see if you qualify.
The differences between a streamlined and a standard loan are distinguished by just how much money you need to borrow. It you need more than $35,000, you'll need a standard loan. Anything less than that can be applied for under the streamlined category. A streamlined loan is typically an easy process and involves far less underwriting than a standard loan. Standard loans can be used for homeowners who are essentially building homes from scratch. Homeowners only need a small part of a foundation to exist on a property to qualify for the 203k.
Homeowners who make the effort to improve their properties may inspire others to do the same. The chain reaction can gradually revamp whole areas.
When it comes to making any major improvements to the home, remember to tell your home insurance company. Upgrades such as new appliances, wainscotting, or even exotic plants can alter the value of your home, which may change your policy. It's the best way to ensure that everything is covered in case anything happens to your property.