Monday, March 5, 2012

FHA 203 K Mortgages - Full Rehab - Major Renovations


The Federal Housing Administration or FHA a division of HUD offers the 203k loan program. This loans primary focus is the rehabilitation and repair of single-family properties or a home improvement loan. This full rehab, major renovation loan offers affordable ways to improve an existing residential home.

Quick Facts on the this Loan:

This full rehab, major renovation loan can be used for rehabilitation and/or improvement of any one-to-four unit dwelling. It is designed to be utilized in one of three ways:

o To purchase a dwelling and the land it sits on and revitalize or rehabilitate it. For condos, only the interior repairs may be financed, no outside construction to the dwelling can be financed.
o To purchase a dwelling on another site and move it onto a new foundation on the mortgage property and rehabilitate it.
o For refinancing of existing dwelling and rehabilitating it.

To purchase a dwelling and land and to refinance indebtedness, the mortgage must be a first lien on the property and the loan proceeds must be available before the rehabilitation begins. If moving a dwelling to another site and foundation and rehabilitating it, the mortgage must also be a first lien on the property but the loan proceeds for moving of the dwelling can't be made available until the dwelling is attached to its new foundation.

How it all Works

With home foreclosures on the rise and lenders unwilling to finance repairs, the 203k loan allows repairs and improvements to be financed and the home may be appraised after the repairs enhancing value.

The borrow can finance all repairs, improvements and additions with the 203k rehabilitation loan and it acts as a regular loan, not a construction loan where you must find a conventional mortgage when the construction is complete.

Realtors also find this rehabilitation loan effective as property listings become more attractive if the buyers are aware of the rehab loan and that it is an available option for them.

Dwellings not eligible are properties built less than a year from the time of the request for the 203k loan. Income producing properties, non-residential, and cooperative homes are also not eligible with the exception of interior repairs or rehabilitation to a cooperative home.

This loan is perfect for bathroom and kitchen remodels, removing lead paints or asbestos to meet building standards, eliminate the old or obsolescent look of the dwelling, plumbing and heating repairs, and connections to public utilities like water and sewer. Additional eligible improvements are tile and carpeting, energy improvements, landscape, handicap accessible improvements, and roofing, gutters, downspouts, and new appliances.

Ineligible improvements for this particular loan include barbeque pits, dumbwaiters, and exterior hot tubs as well as saunas, outdoor fireplaces, and swimming pools. Satellite dishes and tennis courts are also considered to be ineligible repairs.

Where to Start

While HUD makes no loans it will work with your lender when you apply for a 203k full rehab, major renovation loan. These loans are effective ways to revitalize a property to enhance its value or for owner-occupied homes.


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