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 FHA 203k
Rehabilitation Loan
What is the FHA 203k Rehabilitation Loan?
FHA Rehab loan allows borrowers to purchase or refinance their home and include the costs to rehabilitate and repair it in the same loan. This solution provides borrowers an affordable, stable financing solution that combines the purchase or refinance of the home along with the costs of the improvements into a single loan. The borrower is given the opportunity to borrow against the value of the home after the home improvements have been made.
Why use the FHA 203k Rehab loan?
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Purchase a home in need of repairs
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Help existing homeowners who need funds to rehabilitate their property
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Save time and money by financing the purchase or refinance with the cost of repairs
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Property being purchased does not qualify for a conventional loan due to excessive need or repairs
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Low-to-moderate incomes or first-time homebuyers that can't afford a turnkey home
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Have credit blemishes or low credit scores that are preventing buying a home in better condition
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Have limited cash for down payment or closing costs
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Want to improve their home and neighborhood
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Improve instead moving
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Expand to accommodate a growing family (Room additions)
Highlights
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Flexible credit qualifying
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Work can be completed by a contractor or by the borrower
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Up to 6 PITI payments can be included in the mortgage if the property is not occupied during construction. (Not permitted on the Streamline 203k loan)
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FHA guidelines apply
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Borrower can borrow against the value of the home after improvements
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Loan is fully assumable to qualified customers with no money down
Eligible Properties:
Purchasing
- REO's (bank owned), Short Sale, Foreclosures, regular sales
- Homes with Incomplete Renovations
- Homes that have outdated Kitchens, bathrooms, etc.
- SFR, 2-4 unit properties, condos in FHA approved projects (with restrictions)
Refinancing
- Homes with outdated kitchen, bathrooms, etc.
- SFR, 2-4 unit properties, condos in FHA approved projects (with restrictions)
Rules and Guidelines
- Work must begin within 30 days of close of escrow (COE)
- Must be owner occupied, primary residence
- Borrower(s) must be US Citizen, permanent & nonresident alien, or(and) non occupant co-borrower
- Down payment - 3% minimum required
- Money can come from:
- Checking/Savings, 401k, gift from a relative, fiance/fiancee, domestic partner, cash-on-hand
Rehabilitation Amounts:
- Minimum - $5,000
- FHA 203k Standard
- No Max provided the total base loan amount does not exceed HUD's statutory maximums.
- Up to 100% of the loan amount may be allocated to rehabilitation
- Streamlined FHA 203k
Eligible Expenses - Click Here
Other things to know about the program:
- A Contingency Reserve is held on on properties older than 30 years and/or over $7,500 in rehab costs. The amount is minimum of 10% and a maximum of 20% of the total rehab costs. This reserve is used to cover health, safety, and unplanned issues that may arise during construction. If the reserve amount is not used, after all construction is completed the remaining amount can be applied to either principal or used to make additional improvements (additional approval is required).
Understand the basic process flow of the 203k Rehab loan: Basic Process Flow
To learn more about the program including Holdback Funds, the actual draw process, pricing, closing costs, time frames of the program, and to gain access to other 203k resources call (951) 662-3389 or fill out the form below to request a call from me or my staff.
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