What is the FHA 203-K Insured Rehab Loan

Many of homes today that are being sold need a lot of work and updating. Sometimes potential buyers do not pursue these homes because they feel that the work that is needed and the amount of money they will have to pay out of pocket in order to bring these homes up to date will cost more money than they have. With that in mind lets talk about the FHA 203-K loans. So you may ask what are FHA 203-K loans? The answer is simple- the FHA 203-K backed loans are FHA insured loans in which a borrower may use the mortgage toward the purchase of  a home and a portion  of the money toward rehabbing the home.  Another part of a 203-K loan can also be borrowed by a homeowner to rehab their current home primary residence  in order to make repairs and updates.  In both cases the financing of the home and rehabilitation of the home can be combined into a single mortgage.

Some of the guidelines for an FHA 203-K loan are that the borrower needs to live in the residence as their primary residence after the work is completed.  This is not the loan for you if you want to fix and flip houses.  Other things you need to understand is when work is being done you are not allowed to do the work yourself or have a friend or family member do the work.  The work must be completed by certified FHA 203-K contractors and inspected by certified 203-K inspectors.

One of the possible draw backs to using FHA 203-K loans is that if you put an offer on a house the homeowner may not want to accept your FHA 203-K offer because of the amount of time that many 203-K loans take.  There is also a higher amount of paper work that is required during the process.  In terms of the part of the loan that is ear marked for upgrades and repairs that loan is help separately by the lender and is released to the builders after the work they have done has been inspected by a certified FHA 203-K inspector.  This is a time consuming process especially if the house you are working on requires a substantial amount of repairs and upgrades.  Ideally these loans are for people who own a house or they want to purchase a house and the owner needs the extra time waiting for the closing to move out.  The FHA 203-K loan are designed to protect the borrower.

If you have any questions or concerns please send me an email.


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Thomas Roberts -Realtor

As a licensed real estate sales professional and a Certified Buyer Representative CBR my top priority is to deliver unparalleled customer service delivering the highest quality care for all of his clients.

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