FHA 203k Reno Loan FAQ's - How does the ARV or After Renovated Value work?
10/10/2024
The FHA 203k uses an After Renovated Value appraisal rather than an as is appraisal.
This is valuable for a number of reason but let's first get into what it is.
The ARV is an appraisal based on what the house WILL BE WORTH once the renovation is complete. For example, if your plan is to update the kitchen and bathrooms or maybe do an addition, the new value of the home could increase substantially. This means rather than your home appraising for the $300k that it is worth now, the ARV could be $400k or better.
Why is this important you ask?
If you want to maximize the amount your can borrow....an appraisal of $400k gives you more room than an appraisal of $300k. This means you can do more renovation and get exactly what you want! The math is easy.
- As Is Appraisal of $300k - $250 Current Mortgage = $50k in equity to pull from.
- ARV Appraisal of $400k - $250 Current Mortgage = $150k in equity to pull from.
More Equity Means More Reno Budget!