FHA 203K Loan Program
The Section 203(k) program is the Department’s (HUD) primary program for the rehabilitation and repair of single family properties.
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. Rehabilitation/repairs are completed after closing.
There is a standard 203(k) loan program and a streamline 203(k) loan program. The minimum amount for rehabilitation and repair is $5,000 and the maximum is $35,000 for the streamline 203(k). The streamline 203(k) is not meant for rehabilitation that requires any structural work to be done. Typically, with the streamline 203(k), the work would begin within 30 days of closing and would be completed within 6 months of closing. If a property needs more than $35,000 in work and/or needs major rehabilitation/repair, then the standard 203(k) loan program would have to be chosen.
To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The property must be owner occupied.
There are a lot of guidelines for the 203(k) loan program. Too many to explain everything in this post. Many banks have there own overlays, so the 203(k) guidelines can slightly differ from bank to bank. For example, some banks may not have a minimum amount for rehabilitation/repair on the streamline 203(k) loan program.
It’s important to discuss your specific project with a mortgage loan officer, so that you can find out how the 203(k) guidelines apply to your specific situation.
Click here for more information about the FHA 203(k) loan program.