FHA 203K Rehab Financing
Finance and Rehab your Duplex with One Loan
What Is a 203K Loan?
The FHA 203K is a great financing alternative that allows you to purchase or refinance a duplex and rehabilitate the property using just one loan. The projected rehabilitation costs are held in an escrow account and disbursed as work is completed, inspected and approved. The loan amount is based on the lower of the projected market value following repairs or purchase price plus renovation costs.
• Properties that are sold “as-is” often would not qualify for a standard FHA loan. However, 203K loans are designed for the improvement and modernization of the property.
• This loan program allows for 1-4 unit dwellings, including condominiums.
• Where zoning allows, a 203K loan can be used to convert a single family dwelling into 2 to 4 units.
• Up to six months of PITI (principal, interest, tax and insurance) payments can be financed to assist those who would otherwise be required to make double-housing payments. A lending consultant will determine the number of months the property will be uninhabitable.
• The loan can be used for complete reconstruction of a home on its original foundation.
• The loan enables you to purchase foreclosure properties that require repairs. Most HUD foreclosure properties can be bought and rehabbed utilizing a 203(k) loan.
• Up to 110% (100% on condominiums) of the "after-improved" value of the property may be used as basis for mortgage amounts, figuring appropriate LTV (Loan-to-Value) factors.
• Buyers who purchased a property with cash can use the 203K program to complete repairs or modernization and then replenish funds used to originally purchase the property. The loan must close within 6 months of the original purchase date.
• The FHA 203K loan can be used increase the square footage of the structur by building an addition, a second floor or finishing a basement or attic space.
What are FHA 203K Loan Eligibility Requirements?
In the past, homebuyers would have to apply for multiple loans in order to purchase a fixer-upper. Now those separate loans are conveniently packaged in one FHA 203K loan.
1 - 4 unit properties being used for residential purposes are eligible for the loan. Below, are some 203K loan requirements to review to see if you are 203K eligible.
Fortunately, it’s getting easier for homebuyers to get approved for an FHA-backed home loan. If you currently have at least a 620 FICO score and 3.5 percent down, you could be eligible for an FHA 203K loan.
Who is eligible for the FHA 203K loan?
If you haven’t owned a home in the past three years, you would be considered a first-time homebuyer, eligible for the FHA 203K loan program. These loans are also available to current homeowners. As long as you live in, or plan on living in the subject property and meet all other FHA 203K requirements, you’re eligible for the 203K loan program.