what is an FHA "rehab" loan and how does it work?

  • March 07 2010 - Maple Valley
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Answers (3)

Profile picture for DaveAndersson
There are two types of FHA 203k Rehab loans available - Standard & Streamline ($35k max, no structural work). These loans can be used for purchase or refinance. They are similar to a one-time close construction loan. You can buy/refinance and include repairs/renovations in the same loan. Very few lenders offer this product today. I can refer you to a lender that does both types of these and has the lowest minimum fico score requirement at 580. Another thing to keep in mind is the time the lender takes to disburse the draws to the contractor. I've heard of horror stories where the lender takes 60-90+ days to get the contractor paid. The lender I know disburses in 10 days, probably the fastest in the industry.
  • March 22 2010
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"I approve Steve Felty message"  :)

I recommend attending a home buyer workshop to get the nitty gritty of these types of loans. The classes are free and you can talk to a loan pro or schedule an appointment with a HUD Mortgage Counselor in your area.   
  • March 07 2010
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the FHA 'rehab' loan is called the 203k loan. 

Essentially you hire the services of a licensed and approved FHA consultate to review the work you want to do - they determine if it's a good idea and financially viable.  

The 203k loan amount is set by the cost of either the purchase price or the payoff of your current financing plus the expected construction costs.  the construction costs areeither put in the title companies escrow account, or more commonly retained by your lender until work milestones are completed and draws are issued.

In my opinion, the 203k program is like most government programs - it's a wonderful concept, but a royal pain. 

There's an active member of these boards by the name of Andrew Adams who you should initiate contact with as I beleive that's his speciality.  Search lenders in MA and you should find his profile.
  • March 07 2010
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