Many of our clients lately have been utilizing a fantastic mortgage program called the FHA 203(k) Loan, or otherwise known as a rehab loan. Essentially what this loan program allows a buyer to do is finance repairs and improvements to their home by rolling the cost of these repairs into their mortgage. This is a much more affordable way to go than paying out of pocket or utilizing alternative credit such as a Home Depot credit card where you likely pay upwards of 20% in interest.

Here are some of the highlights of this program:

  1. For properties that are distressed or needs updating
  2. Borrower can finance purchase of new property and either fix the property OR remodel/update the property – NO limitations on improvements other than loan amount maximums required by FHA
  3. Can be used as a purchase OR refinance. Purchases with 3.5% down, Refinances up to 97.75% Loan to Value
  4. Can borrower up to 110% of future value of appraisal
  5. Gift Funds OK for down payment
  6. Owner Occupied 1-4 units, PUDs, condos and Real Estate Owned (REO) properties
  7. Need Certificate of occupancy for 12 months to use this program on new construction not completed
  8. Cure UNPERMITTED additions by removing or getting it permitted
  9. Funds can be used for kitchen or bathroom remodels, expansion, foundation issues, etc.
  10. Escrow is closed in current condition
  11. Borrower or contractor can complete improvements – Borrower must be qualified to do meaning they must be licensed in the field
  12. Up to 6 months PITI can be built into the mortgage to help a borrower who can not move in right away due to the rehab
  13. Luxury items NOT eligible like a swimming pool, hot tub, etc.
  14. Minimum score is 620
  15. Contingency reserve required of 10%-20% of total cost of rehab
  16. Work must be completed in 6 months 

There are two types of 203(k) program:

  1. Regular:  unlimited amount available for improvements up to maximum loan amounts.  Requires a HUD consultant and extra review processes on cash disbursements.  Up to 5 disbursements, inspections required before each disbursement
  2. Streamline:  up to $35K for improvements.  NO HUD consultant needed and very easy cash disbursements.  Only two disbursements, 1 at the beginning and the rest at completion.  No inspections required.

To find out if you qualify for this loan, please give us a call at 425-413-6428 or email us at info@HappyHomeTeam.com