In Light of the Economy... I'm going to Rehab- 203(k)

Real Estate Broker/Owner with Casa Latino A.T.


Rehab??? That's right. I am looking into a program offered by the department of Housing and Urban Development (HUD), also known as the 203k mortgage. Here is a quick description of the program as posted on the HUD website:


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. (

We know the market is tough, no doubt about it, but what do we do when the going gets tough?...         The tough get going. This program opens up new doors to clients that have traditionally not been able to purchase a certain home because it would cost too much money to repair. Money that would have been coming out of their pocket, money they did not have. With the 203(k) program all those worries go away because homebuyers have the opportunity to rehab the property and make it into their dream home and since the 203(k) mortgage is covered under FHA guidelines, the client will get a great deal.

We all know that the first step in rehab is realizing that there is a problem- The economy.

Casa Latino A.T. is adapting this opportunity to help future homeowners overcome yet another     obstacle.

Once you realize what you are up against, you can help yourself by looking for solutions. Rehab may not be for everyone, but it sure helps.


Comments (4)

Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

203(k) is one of the best and least understood financing in the country.  Good for you.  I love them.

Feb 18, 2009 04:49 AM
Barbara Delaney
Park Place REALTORS, Inc. - Roanoke, VA

Dear Jose,

FHA 203k's used to be nightmares. The last one I did was smooth as silk!

The basic processing has been streamlined. I think the key is to get a great contractor, who understands rehabs and can survive on the series of draws involved.


Feb 18, 2009 04:50 AM
Jose Santos
Casa Latino A.T. - Concord, CA

Lenn - Thank you for the comment you are right. It is the least understood financing tool out there, but definitely has great reward.

Barbara - Yes, a great contractor will be needed. I'm glad the processing has improved.

Feb 18, 2009 06:51 AM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

We invite you back to ActiveRain in 2018!

Much has changed since you last posted to ActiveRain.  I encourage you to take another look at the website.  

  Best to you!

Apr 18, 2018 08:37 PM