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FHA 203K Rehabilitation Mortgages

If you're thinking about buying a home that needs a lot of work, this is the perfect mortgage for you. The FHA 203K is a unique program will not only help you buy the home, but will also lend you the money to bring it back into livable conditions as well.

How can the FHA 203K be used?

This program will help with the rehabilitation and/or improvement of an existing 1 to 4 unit home, condominium or HUD home. It can used to bring illegal dwellings into code compliance. It even works on a burnt out home, incomplete shell or an empty foundation. Co-ops are unfortunately not eligible. The FHA 203K in general will work in one of three ways:

  • To purchase a home and the land on which the home is located and rehabilitate it.

  • To purchase a home on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.

  • To refinance your debts and rehabilitate a dwelling. For example: a kitchen or bathroom remodel.

What are some of the guidelines I should know about?

The dwelling that you are going to do the work on must be a home that you intend to occupy as the owner after the work has been completed. You must also do a minimum of $5,000 in improvements or repairs to the home. The Federal Housing Administration will lend up to 97.75% of the future value of dwelling as estimated from improvements or repairs to be done. Your end loan will be an FHA mortgage and you cannot exceed the maximum FHA loan limits for the area in which the property is located in.

As you've probably started to figure out, this isn't the simplest mortgage in the world to do. Throughout the whole process however, you will have a FHA 203K consultant who will help guide you through it. Unlike other construction loans, this mortgage also allows you to do some of the work yourself so you can benefit from "sweat equity".

Do FHA 203K mortgages work with
the Energy Efficient Mortgages?

Yes they do, and there are provisions within the FHA 203K mortgage which also supports your investment in renewable energy as well. One example of this, is your ability to spend up to 20% of the future appraised value of the home on solar power. We won't go into the nuts and bolts of the guidelines here as they are complex, but should you choose to do an FHA 203K we'll make sure that the energy efficiency of the home is properly addressed.