The 203k Home loan is a program the Federal Housing Administration (FHA) uses to finance the rehabilitation and repair of single family homes. FHA encourages mortgage lenders to use the 203k loan because it is an important tool for community and neighborhood revitalization.
With all the foreclosures and short sale on the market there are several properties available that do not qualify for conventional financing.
How it works
With Most mortgage financing plans provide only permanent financing. Meaning, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.
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When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods.
The 203(k) Rehab Loan program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.
The 20k Rehab Loan is the perfect opportunity for homebuyers and investors to buy distressed properties that would not normally qualify for financing. We have a FREE weekly webinar that explains the 203(k) home loan in detail. We show you how the program works and which properties will qualify.
Some of the things our FREE weekly webinar will cover:
- What properties are eligible
- How the program can be used
- What improvements are eligible
- What improvements are required
- How the “as is” and “after repair” appraisals work
