A Little-Known loan program for Fixer Uppers

Home buyers thinking of purchasing a distressed property in need of repair, but who are concerned that the cost of the repairs could drain their savings account may qualify for the Federal Housing Administration's (FHA) 203(k) rehabilitation program.

* The FHA's 203(k) rehabilitation program provides loans for covering renovation costs as well as the purchase price of the primary residence. Investors are not eligible for this program. Additionally, similar to traditional FHA loan programs, the rehab program allows for a down payment of as little as 3.5 percent.
* A common misperception about the program is that the house needs to be unlivable. Realistically, the property just needs to be outdated, according to a lender familiar with the program. The property "just has to appraise below market value and then at market value with the repairs."
* Improvements deemed "luxury" are ineligible; however, the program has a wide range of definitions for "repairs" and "modernization." Covered repairs include items such as a new roof or heating system, as well as decorative changes, like replacing vinyl with ceramic tile on the kitchen floor or painting the interior.
* In addition to putting down at least 3.5 percent of the current value of the property, buyers also must use a HUD-approved lender, appraiser, and a contractor approved by the lender for the repairs.

  • November 16 2010 - Hayward
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Answers (2)

Profile picture for the_country_hick
When you said little known I was expecting some competition to the FHA 203k.

I thought most were well aware of the 203k loan possibility. I know I have been aware of it.
  • November 16 2010
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Profile picture for PamSitterly
This is a wonderful program, although under-utilized. I have had issues in the past finding lenders who will lend on it, but I think that is changing. I definitely promote it!
Pam Sitterly
  • November 16 2010
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