Can an FHA 203k loan be used for a refinance?

Home Inspector with, covering the USA S0289

Can an FHA 203K loan be used for a refinance project?

The short answer is absolutely yes. Is a couple scenarios that we're seeing prevalent in today's marketplace.

Refinance with the FHA 203k loan program

1) first scenario is that you as a Realtor may have sold a home to somebody that needed work. It wasn't quite the house they wanted but they felt they could get by with it and fix it over period of time. You and I both know that won't likely happen. This family likely has a life and life goes on. In the hustle and bustle of everyday life you have to decide what will get done and what won't it done and quite often the home doesn't get repaired as quickly as everybody had hoped or thought it might be.

This is ideal for a FHA 203K refinance project. The owners of this home can refinance and get the money to repair appear the home all-in-one low interest loan. This is what we specialize in and were finding more and more situations like this exist than you might think. If you sold the home recently any time within the less several years you may want to touch bases with those people and see if they were able to get that home fixed the way they wanted. If not you might suggest the FHA 203K as a way to do that. If they have any equity in this home at all they likely won't have to come out-of-pocket for any costs and fees. Remember FHA is only 3 1/2% down payment so if they have equity equal to that, they may not have to come out-of-pocket.

2) second scenario we see is that you just sold at home to them a couple months ago or less and it needs work. If we refinance that home into a 203K within six months of the original close of escrow we get to count the money they put down originally as money they now have in this project and again we could very well refinance with no more money out of their pocket and get the money to make all the repairs they need.

3) third scenario is that the home has been well used over a long period of time with very little maintenance or upgrades. The owners have opted to repair and update their home rather than sell it and move. Again this home likely has equity and we might be able to refinance with a 30 year fixed-rate and get the money to renovate the home all in one low interest loan.

4) forth scenario is a family inherits a home that needs lots of work. There's a couple choices, one being if some member of the family is going to move into the house they can do an FHA 203K refinance and get the money to fix it up all in one low interest loan. If all they want to do is fix this home and get the top dollar for it they might consider a Fannie Mae HomeStyle loan which allows investment properties and second homes to be refinanced and renovated in a low interest loan program.

In any case both of these renovation loan products are viable alternatives to purchasing already fixed up homes and quite often leave considerable equity for the owner.






Posted by

Mike Young, 203k Team Leader    Mike ready for your 203k order

To learn more about the FHA 203k loan program go to www.203kOnLine.comWhat is your fee? 

Got a 203k project giving you "fits" contact www.203k911.comIf you are looking for quality 203k software for consultants to speed up the underwriting process..

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Re-Blogged 6 times:

Re-Blogged By Re-Blogged At
  1. Kathleen Daniels 04/14/2013 05:50 AM
  2. Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA 04/15/2013 04:39 AM
  3. Jeanine Metts 04/16/2013 10:55 PM
  4. Shannon Coe 04/17/2013 03:27 AM
  5. Shanna Hall 04/18/2013 08:35 AM
  6. Winston Heverly 05/05/2013 09:56 PM
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Joy Carter & Jeff Booker Brother and Sister Team
Keller Williams Parkland/Coral Springs Realty-GreatFloridaHomes Team - Coral Springs, FL
Trust Your Family's Move To Our Expertise!

That was a GREAT Blog! I love when I learn something new. Thank you so much!  Joy

Apr 15, 2013 03:55 AM #6
Lisa Hassler
Kinlin Grover - Yarmouth Port, MA
Specializing in historic homes

Hi Mike,  Thanks for this post!  I specialize in historic homes and I have folks that are wanting to finance with a 203k in order to do the repairs right away.  I have a question, is the 3 1/2% down computed on the current value of the home or the estimated completed value of the home?  Do you factor in the increase in value to the home so that the  buyer can borrow above the current value of the home?


Apr 15, 2013 04:04 AM #7
Melanie Narducci
Hillscape Properties, Inc. - San Francisco, CA
Your San FranciscoBay Area Real Estate Expert
Hi Mike! It was great meeting you and finding out about a new tool to use for specific situations, the 203K! I had never heard about it but appreciated the before and after projects booklet you passed around. Hope to see you all at the next meetup. It was great to meet you Kathleen and Lottie too!
Apr 15, 2013 04:09 AM #8
Carolyn Roland-Historic Homes For Sale In Delaware and S. Chester County PA
Patterson-Schwartz Real Estate - Wilmington, DE
Carolyn Roland, GRI, CRS

This is very interesting stuff, especially since I specialize in older and historic homes. Reblog!

Apr 15, 2013 04:37 AM #9
Paul Silver
Tiverton, RI
Rhode Island full service real estate firm

interesting indeed... I had not thought of  203K for after purchase stuff, thanks for the great post...

Apr 15, 2013 04:41 AM #10
Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

This is a valuable resource for so many homeowners that need funds to repair a house and didn't think there was anyway do get the money short of a HELOC.

Apr 15, 2013 04:55 AM #11
Jill Sackler
Charles Rutenberg Realty Inc. 516-575-7500 - Long Beach, NY
LI South Shore Real Estate - Broker Associate

I agree with you that "now and again, it solves issues."

Apr 15, 2013 05:11 AM #12
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Mike - Great information that I'm guessing most of us didn't know. When I was an agent I only had one experience with a 203K loan - and it was a nightmare. I think because the lender didn't really know the process and the buyers were do-it-yourselfers. No one around here really knew what to do or how to do it.

Apr 15, 2013 05:27 AM #13
Rodney Mason
Guaranteed Rate - Atlanta, GA
AL, GA, SC, & TN

This is still a program that not very many Buyer and Agents know much about.  For those who do know about it, its important to note both the Streamline and Consultant versions exist.  I still hear a lot of Agents incorrectly state that the repairs are limited to $35K.

Apr 15, 2013 07:31 AM #14
Kelle & Kevin Wirt
The Wirt Team - Horizon Realty - New Braunfels, TX
"There is a new Horizon in Hill Country RE!"
Wow, what great information. I learn something new very day that I can really "use" in my professional life. Thank you for this article!
Apr 15, 2013 08:46 AM #15
Mike Young, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Lisa, the 3.5% interest is on the full amount of the loan. Though we get paid up front the cost of our services is typically counted as part of the 3.5% down payment.

Bob, Jeff & Joy, thanks for stopping by and leaving a comment.

Melanie, the pleasure was all ours, thank you for your kind words.

Paul, I just got off the phone with a client who is closing on their home later this week and he is about to start a refinance to get the money to do what he wants to the home.

Ed, there are a couple of products that can help someone in this situation. The HomeStyle and the FHA 203k. 

Jill, that is what it is all about, having the right tool when you need it, you got it.

Marte, thanks for stopping by. Glad to be of service.

Rodney, both are consultant k's you just dont' have to have a consultant on a streamlined k and they make up about 98% of the problem 203k loans according to HUD. I have one I'm working on now that is $670,000 in construction cost and many over $250,000 and if you think the streamlined k is good up to $35,000 you will get bit sooner or later as it is $35,000 including costs and fees. If you are working with Wells Fargo the work can go up to $34,200, Prime Lending wants 10% contingency so you need to factor that into the $34,200 making it $3420 less or about $30,780 for the actual construction bid and so forth. Some lenders "require a 20% contingency" so it is even less for the construction. M

Kelle, Good to know you liked it, thank you, M

Thank you all for stopping by, we appreciate it

Apr 15, 2013 09:54 AM #16
Michael J. O'Connor
Diamond Ridge Realty - Corona, CA
Eastvale - 951-847-4883

This is awesome.  Like Joy (#6) I love learning about something new like this.  I have yet to do a 203k purchase contract as it seems to be pretty rare in these parts but now I have an expert in my column, located in CA!  :-)  

I think one potential other scenario that I'll be looking at with clients are when the client wants to live in the house for a little while to really decide what upgrades to make.  Sometimes you really need to live with a house to better understand what would be right for that home.

Apr 15, 2013 10:53 AM #17
Venancio Gonzalez
Windermere Kelso/Longview - Longview, WA
Longview WA Real Estate Broker - 360-751-4001

Mike - thank you for sharing such great information. There is always something new to learn, I didn't know you can use a 203k to refinance. I will pass this info to my client and hopefully some of them can take advantage of the program.

Apr 15, 2013 04:54 PM #18
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Very good lessons about 203k loans and financing options.

Apr 15, 2013 06:12 PM #19
Mike Young, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Michael, I hadn't thought of that, interesting way to think of it though. It just goes to show how we learn from each other.

Mike, We are hear to inform and assist. I just did one in Kansas virtually to help a family get one done where there wasn't a consultant nearby to help them.

Kimo, thank you for stopping by.

Apr 16, 2013 12:27 AM #20
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Good to know options.  Nice thinking out of the box.

Apr 16, 2013 12:46 AM #21
Mike Young, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Hi Lyn, I've always thought out of the box... thanks for the comment

Apr 16, 2013 01:42 AM #22
Dora Griffin
D A Griffin Financial.LLC - Fort Thomas, KY
NMLS 6380

Good post and very useful info for real estate agents or consumers!

Apr 16, 2013 07:34 AM #23
Antonio & Alexia Cardenas
Alameda County - San Leandro, CA. - San Leandro, CA
"The Realtors In Motion"

Thank you again Mike for the useful information, you were at my house, and you gave us a good speech about these loans, and you gifted a couple of books to each of us who attended the AR meetup in San Leandro last Saturday. As you can see, we did not just eat, and drink and share stories, we actually learn something and got the expert (you Mike) in this case to give us very valuable information about something that will help us make money in the future. Thank you again Mike, we will be in touch! I guarantee you that!



Apr 16, 2013 11:28 AM #24
Mike Young, covering the USA - Las Vegas, NV
FHA 203k Consultant 916-758-1809

Dora, thank you for the kind words

Antonio, you were a very gracious and graceful host, thank you for opening your home to the ActiveRain group and sharing your stories about your farming techniques. We enjoyed it very much. M

Apr 16, 2013 03:12 PM #25
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