The 203(k) rehab loan fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. Interim acquisition and improvement home loans often have relatively high interest rates, short repayment terms and balloon payments. The FHA 203(k) rehab loan offers a solution that helps borrowers cover both the acquisition and rehabilitation of a property. Section 203(k) insured loans may save qualified borrowers time and money.
203k Rehab Mortgage Loan
For less extensive repairs/improvements (less than $35,000 in repairs), we recommend the FHA 203k streamline loan.
The 203(k) rehab loan will cover the purchase or refinancing and rehabilitation of a home that is at least a year old. A portion of the loan proceeds is used to pay the seller, or in the case of a refinance, to pay off the existing mortgage. The remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5,000, but the total value of the property must still fall within the FHA streamline mortgage limit for the area.
