Lisa Barton

Thinking of buying a home that needs repairs?  Maybe you’ve spotted a “diamond in the rough” property that could be a dream home with the right repairs and remodeling. Wells Fargo Home Mortgage offers FHA 203k renovation loans that allow the borrower to finance the purchase price and the cost of improvements into the loan amount. As with all of these 203k products, they are only allowed in conjunction owner-occupied properties, either with a purchase or refinance transaction. We use the “after improved” value of the property, and it is a “single close” fully amortized loan. In my last entry, I spoke about the FHA Remodel Express program exclusive to Wells Fargo Home Mortgage——-that product is fantastic for cosmetic repairs and remodeling up to a cost of $35,000.  The work allowed includes repairs and replacements to roofs, existing HVAC systems, existing flooring, minor remodeling, new windows and appliances, etc… It has the normal 203k loan merits of one application, one approval process, one closing, and one payment, yet it is limited to “renovations” only that are non-structural in nature. It also restricts the borrower to using one national improvement company/contractor—-The Home Depot, Lowe’s, or Sears. 

While the FHA Remodel Express product is amazing, some borrowers need improvements that are “structural” in nature, which is where our Standard 203k product shines. With this product, improvements can include foundation repairs, roof replacement, new plumbing and electrical systems, and full room additions, to name a few. Here multiple licensed contractors are allowed, and there is no limit on the cost of the repairs (bearing in the mind the maximum total FHA loan amount for your area, which is currently $387,500 in northeast Florida). Also, the borrower is actually allowed to do the contractor work upon approval. In addition, Wells Fargo offers a Streamline 203k version, which caps the repairs at $35,000 and only allows non-structural repairs, but offers the benefit of allowing multiple contractors.

The 203k products are great ways to purchase bargain priced homes and/or larger homes in need of repair. The borrower gets to renovate them to reflect their tastes and needs, all while having one payment amortized over the life of the loan. 

Donald Ster, MBA, is a senior-level mortgage consultant working for Wells Fargo Home Mortgage.  He has been in the industry for 7 years, and resides in Jacksonville, Florida with his wife and daughter.