What is the 203k?
It's a rehab loan.
It's provided by the Federal Housing Administration.
It insures mortgages used to purchase, or refinance, and rehabilitate residences with up to four units.
A portion of the loan proceeds are used to purchase the property or refinance an existing mortgage, and the remaining funds are deposited into a Rehabilitation Escrow Account or REA.
The REA funds are released while the work to repair the property is in progress.
Homes financed under this program must be at least one year old.
The FHA also imposes a certain level of structural and energy-efficient standards that must be met on all rehabilitation work.
Improvements that qualify for rehabilitation extend over a wide range and the costs of the upgrade work must total a minimum of five thousand dollars in order to be eligible for a 203k financing consideration.
Improvements that are considered temporary or of the luxury type, such as a pet door for your poodle, won't be approved.
The rules for the 203k regarding the property's value, for determing the maximum amount of money to be loaned, is the least of:
1. The property's current value plus the cost of the rehabilitation.
2. The existing debt to be refinanced, plus the cost of the rehabilitation.
3. 110% of the property's value after rehabilitation.
What experiences have you had with the 203k ?
Do you use it ?
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