FHA 203K Rehabilitation Loan

An FHA 203k program is for the purchase or refinance of a property that needs repairs, renovations or rehabilitation.  The loan provides funds for the purchase of the property as well as additional money to fix up the home.  These types of properties are normally owned by a bank and are not in living condition, therefore they are deemed unfit to qualify for traditional mortgage financing.

Do I Qualify?

FHA 203k allows buyers to purchase these homes with a small down payment (3.5% of acquisition cost) as long as the rehab is approved and the buyer occupies the property as their primary residence.  The qualifying terms are slightly more restrictive than a regular FHA loan, but in some instances flexibility can be granted if the borrower has ample cash reserves after settlement. 

How Much Money Is Needed            

The maximum loan amount granted is 96.5% of the Acquisition Cost, calculated like so:

                                  
Example 

For the property in this instance, it would cost the borrower $9,450.00.  Keep in mind that there will still be the normal closing costs associated with a mortgage, however, it can be paid by the buyer or seller (6% maximum seller contribution). Due to the unique nature of these loan applications, they will always be manually underwritten. 

How Long Do I have to complete the renovations?

FHA 203k rehab construction must be completed within 6 months of settlement, no exceptions made.  Under the 203K loan program, the home buyer can complete the repairs and renovations without the need of hiring a licensed contractor.