What is an FHA 203K Rehab Loan?
The FHA 203k renovation loan program provides funds for both the purchase and renovation of a home packaged into one single mortgage loan. Once the purchase of the home is completed the renovation funds are provided and held in an escrow account, typically by the title company. The amount of renovation funds is predetermined based on estimates provided by approved contractors and released to the contract upon the competition of renovation phase and passing of inspection.
Who should get an FHA 203K mortgage?
An FHA 203K mortgage is a great way for a homebuyer to purchase a home that needs repairs or modernization and finance the cost of repairs into one single loan. This eliminates the need for short term acquisition and improvement loans that have high interest rates and short repayment periods.
The 203k can and will save the homebuyer time and money. This loan will also protect the lender by allowing them to have the loan insured before the property repairs or renovation is completed at the value set due to repairs or renovation.
According to HUD here are the eligibility requirements…
The extent of the rehabilitation covered by Section 203(k) insurance may range from relatively minor (though exceeding $5000 in cost) to virtual reconstruction: a home that has been demolished or will be razed as part of rehabilitation is eligible, for example, provided that the existing foundation system remains in place. Section 203(k) insured loans can finance the rehabilitation of the residential portion of a property that also has non-residential uses; they can also cover the conversion of a property of any size to a one- to four- unit structure. The types of improvements that borrowers may make using Section 203(k) financing include:
- Structural alterations and reconstruction
- Modernization and improvements to the home’s function
- Elimination of health and safety hazards
- Changes that improve appearance and eliminate obsolescence
- Reconditioning or replacing plumbing; installing a well and/or septic system
- Adding or replacing roofing, gutters, and downspouts
- Adding or replacing floors and/or floor treatments
- Major landscape work and site improvements
- Enhancing accessibility for a disabled person
- Making energy conservation improvements
HUD requires that properties financed under this program meet certain basic energy efficiency and structural standards.
To apply for an FHA 203K Rehab Loan click the button below: