If so, then an FHA 203(k) rehab loan might just be the right loan for you. The FHA 203(k) Rehab Loan is a great loan because it allows buyers to buy a home that is in need of some renovations and to finance the purchase (or refinance) and the home renovation expenses with just a single mortgage. In other words, you can borrow enough money to buy a home and to pay for any necessary renovations or home improvements. In order to qualify for a FHA 203(k) home loan, you must meet certain requirements that are set by the Department of Housing and Urban Development (HUD) and meet the general requirements of any FHA mortgage.
Here's what you need to do to get a FHA 203(k) Rehab Loan:
Once you close your loan, a Repair Escrow Account is setup which holds the money to pay for the renovations. With a Limited K Loan, contractors can receive 50% of the total amount agreed on within 15 days of loan closing and the remaining balance will be paid once the repairs are completed. With a Consultant K Loan, a HUD 203(k) consultant will work with you as the owner and they will inspect repairs as they are completed and allow for interim draw payments based on the completed work passing a final inspection. With both of these loans, if there is any remaining unspent money in the repair escrow account it will be used to pay down the principal balance of your loan.
Here are some advantages of a Rehab Loan:
Rehab loans are designed to help you improve your existing home or buy a home that can benefit from upgrades, repairs, or renovations. With a 203(k) rehab loan, you can create home equity fast by improving your home through sweat equity.
* These loans are for owner occupied borrowers only. FHA 203(k) loans are not for fix and flip investors.