Best 203(k) Rehab Mortgage Lenders In 2022

If you’re buying a home in need of some work, you can get the financing for both the purchase and renovation through an FHA 203(k) loan, also known as a rehab loan. This type of FHA loan keeps things simple with one loan, one set of closing costs and one monthly mortgage payment. Here is Bankrate’s guide to the best 203(k) rehab mortgage lenders in 2022.


Methodology

To determine the best FHA 203(k) rehab mortgage lenders, Bankrate evaluated lenders based on several criteria, including affordability (APR, discounts and/or incentives); scope of loan offerings; customer reviews; and online capabilities.


Best FHA 203(k) rehab mortgage lenders

Guaranteed Rate

Guaranteed Rate mortgage review

Loan products Purchase and refinance, conventional, jumbo, FHA, VA, USDA, renovation loans, interest-only
Credit requirements  620 for conventional and FHA loans; 580 for VA loans
Pros 
  • Streamlined digital experience
  • Over 350 locations nationwide for in-person support
  • Interest rates listed online and updated daily
  • Rated as a top 3 retail mortgage lender by Scotsman Guide
Cons 
  • Home equity loan products not available
  • Higher credit score requirement for FHA loans
Highlight  Guaranteed Rate offers homebuyers a convenient digital experience coupled with live support from a human.

Flagstar Bank

Flagstar Bank mortgage review

Loan products Purchase and refinance; conventional, jumbo, FHA, VA, USDA, home equity loan, construction and renovation loans
Credit requirements  620 for conventional loans; 700 for jumbo loans; 580 for FHA loans
Pros 
  • Offers several government-backed loan products with competitive rates
  • “Destination Home” Mortgage with no down payment and flexible eligibility criteria
  • Get up to $5,000 towards closing costs or your down payment with the Flagstar Gift Program
Cons 
  • Lender fees not disclosed online
Highlight  Flagstar Bank offers grants and down payment assistance programs to help make your dreams of homeownership a reality.

LoanDepot

LoanDepot mortgage review

Loan products Purchase and refinance; conventional, jumbo, FHA, VA, construction and renovation loans
Credit requirements  620 for conventional loans and VA loans; 700 for jumbo loans; 580 for FHA loans
Pros 
  • Available in all 50 states
  • More than 1,700 licensed lending officers nationwide for customer support
  • Accredited by the Better Business Bureau (BBB) with an A+ rating
Cons 
  • USDA loans and home equity loan products not available
  • Fee schedules and interest rates not listed on lender’s website
Highlight  LoanDepot is a direct mortgage lender that offers competitive rates on a mix of products.

Fairway Independent Mortgage Corporation

Fairway Independent Mortgage Corporation review

Loan products Purchase and refinance; conventional, jumbo, FHA, VA, USDA; construction and renovation loans, reverse mortgage, physician loan
Credit requirements  Unavailable
Pros 
  • Over 400 branch locations throughout the U.S.
  • Extensive library of resources for homebuyers
  • BBB-accredited with an A+ rating
Cons 
  • Home equity loan products not available
Highlight  Among its offerings, Fairway Independent Mortgage Corporation has programs that cater to low- and moderate-income borrowers.

Homebridge Financial Services

Homebridge Financial Services mortgage review

Loan products Purchase and refinance; conventional, jumbo, FHA, VA, USDA, construction and renovation loans, investment property, reverse mortgage
Credit requirements  640 for conventional loans; 680-700 for jumbo loans; 580 for FHA loans, VA loans and USDA loans
Pros 
  • Variety of purchase and refinance mortgage products to choose from
  • User-friendly online portal to monitor the status of your loan application
  • Excellent rating on Trustpilot
Cons 
  • Home loans not offered in Utah
  • Not accredited by the BBB
Highlight  With Homebridge, borrowers receive personalized support from local loan originators throughout the financing process.

What is an FHA 203(k) rehab loan?

The FHA 203(k) loan is a type of mortgage backed by the Federal Housing Administration for homebuyers looking to renovate the home they’re purchasing. 203(k) loans tend to come with more competitive rates, and require a smaller down payment and lower credit score compared to other kinds of loans. Like other FHA mortgages, 203(k) loans require you to pay a mortgage insurance premium with your monthly loan payment.

How does a 203(k) loan work?

A 203(k) loan bundles your mortgage and renovation funds into one loan. Once you close on the loan, a portion of the loan proceeds is paid to the seller of the home, and the remaining balance goes toward the renovations.

To be eligible for a 203(k) loan, the home needs to be at least one year old and renovation costs need to be a minimum of $5,000. In addition, the amount borrowed can’t be more than the area’s FHA loan limit, the home’s value after the renovation or its value before renovation, whichever is lowest.

You also can’t use a 203(k) loan for just any project. You’ll need to comply with the requirements for eligible renovations, which include replacing the roof and floors, enhancing the home for accessibility reasons or making energy efficiency improvements.

Who qualifies for a 203(k) loan?

If you’re interested in a 203(k) loan, you’ll need to meet the same requirements for a standard FHA loan:

  • A minimum credit score of 580
  • A debt-to-income (DTI) ratio of 50 percent or less (individual lenders may have higher or lower requirements)
  • The home is your primary residence and passes inspection once renovations are completed

Summary: Best FHA 203(k) rehab mortgage lenders

With additional reporting by Allison Martin

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