203k Rehab Loan: Buying a Fixer Upper or Need to Do Renovations?

     The FHA 203k in simplest form is a renovation loan. It is backed by the Federal Housing Administration for 1-4 owner occupied homes and has become very popular in the past few years. Mainly with first time home buyers that are taking advantage of purchasing short sales and/or foreclosures in this market. The homes have “good bones” but need to updated. Keep in mind the house doesn’t need to be a short sale or foreclosure it can just be a home that needs updating. From Kitchens, Bathrooms, Knocking down walls, Additions, Landscaping, etc it can usually be done with a 203K loan.

     The guidelines are the same as a regular FHA loan. 3.5% is the minimum down payment, and  a maximum of a 6% sellers concession is allowed. However you can’t be handy with a hammer or saw and expect to do the work yourself. A licensed and insured contractor in the county where the house is located is required by FHA, as well as a detailed list of what work will be done, and proper permits if necessary. The work has to be a minimum amount of $5,000 and can go upwards to over $100,000+. The house will be appraised at its current state as well as a second appraisal after all the work has been completed.

     Remember it’s only available for owner occupied homes so an investor would not be eligible for a 203K loan. They also work great for properties that may have Certificate of Occupancy issues, or illegal conversions.  The 203K would allow you to either convert it back to its original state or legalize whatever was changed through the proper channels. 

Provided by  Michael Vassallo (Licensed Mortgage Banker)

For more information 631-806-5569

mvassallo@financialequities.com

www.MVmortgages.com