Even if you have bad credit or are on a tight budget, specialty mortgage options abound. One type of specialty mortgage that’s often overlooked is the 203(k) or DIY home loan. This type of loan allows you to borrow money for your down payment as well as any repairs that need to be made.
That said, a 203(k) loan is significantly different than all other types of mortgages. Because of this, there are three things you should keep in mind.
1. Find a mortgage lender who specializes in 203(k) loans. 203(k) loans are very different than an average mortgage. Because of all the paperwork and prerequisites involved, many lenders are steering away from these types of offerings. Make sure the company you select has a comprehensive understanding of the 203(k) process.
HUD has developed a helpful search page you can use to find a lender with experience. Select a lender at the top of the page and then check the box that says 203(k) rehabilitation mortgage insurance program. This one step can save you significant time and energy, and remember to only work with a qualified professional (like us.)
2. Be patient. The majority of mortgages close within four to six weeks, but 203(k) loans often take much longer. This is especially true if you work with a lender who doesn’t specialize in 203(k) lending. If you want to speed things up, real estate experts recommend working with a “certified contractor.” A professional with this qualification knows the ins and outs of the entire process.
3. Expect delays and hiccups. Specialty mortgages are called “specialty” for a reason. Homebuyers who hope to qualify for a 203(k) loan should be prepared for a lengthy and sometimes challenging process. Be patient and take things one day at a time.