The FHA 203k loans combines the purchase and home improvements in one 15 or 30 year term. Many home buyers find it difficult to obtain a home improvement loan after closing because new home buyers usually have little equity in their new home. Also, home improvement loans are expensive. The interest rates on home equity loans are usually higher than traditional home loans and have a shorter loan term, A shorter loan term results in a higher monthly loan payment.
If you are refinancing your home to a lower interest rate, doesn't it make sense to add a little extra cash to finally take care of one thing or another that you never were able to afford?
There are two 203(k) programs. The limited 203(k) allows the buyer/homeowner to borrow up to $35,000 with little aggravation (assuming the borrower is qualified). The Standard 203(k) variation is a full blown rehabilitation.
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