An important tool for community and neighborhood revitalization, the FHA 203(k) loan offers flexible qualifying and low down payments.  The 203(k)loan program offers borrowers the resources to rehabilitate a home that may be in need to repair, either the home that they currently love in or that special fixer-upper opportunity.  One single loan is used to pay for the purchase (or refinance) and the cost of renovating the home.

Made available to certain lenders by the US Department of housing and Urban Development, the FHA 203(k) program has already provided many buyers with the funds necessary to buy their first home or greatly improve a current home.  The FHA 203(k) loan is available to borrowers of all income levels, to homeowners who plan to occupy the house and for homes with one to four units

Most mortgage financing plans provide only permanent financing. That is, 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.

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 Section 203(k) 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. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

203K Eligible Borrows

            -Owner occupants - purchase or refinance

            -Non-profits

            -Investors not allowed

Types of 203K Loans:

            30-15 year fixed rate

            One Year ARMS

            Assumable to a qualified buyer with no money down

Eligible Properties:

            Single family dwellings

            Condominiums

            Townhomes

            Mixed Use

            1-4 Unit buildings

For more specific information you can contact your mortgage professional or contact me and I can provide you with someone with experience in this type of mortgage.