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One way to buy an affordable home is finding one that neds rehabbing or updating. FHA provides a home loan program allowing homeowners to roll financing for purchasing a home and rehabbing it into one mortgage loan.

FHA Home Rehab Program Rolls Mortgage, Repair Costs into One Mortgage

You want to buy that quaint Victorian, an original Craftsman cottage, or a storm-beaten beach house that needs major renovation and/or repair. How can you get a home loan for purchasing a home in substandard condition? Traditional home loans require that the property being purchased meets certain structural standards. Buyers purchasing "fixer-uppers" can take out short term (and often costly) financing for buying and repairing the property, and later refinance to traditional home loans after the needed work is completed. But if the property is eligible, you could get an FHA loan instead. Here are some highlights of the FHA 203(k) home loan program:

  • One-to four unit residential property: Under this program, one-to four unit properties qualify as single family residences if you plan to live in one of the units. The property being renovated must be at least one year old. In no case may a property be renovated to include more than four residential units.
  • Zoning and building code requirements: All renovations must meet building code and zoning requirements. All improvements must be attached to the existing structure. Building detached structures does not qualify under FHA loan requirements for its 203(k) program.
  • Destroyed/razed structure: If the property being renovated is razed (torn down), part of the original foundation must remain. This distinguishes a renovation project from new construction.
  • Mandatory repairs and upgrades: FHA loan requirements for the 203(k) program include specific repairs needed for meeting health, safety, and energy conservation requirements. Check here for a list of required improvements.
  • Home Loan Amount: The amount of your FHA 203(k) mortgage will be based on the estimated appraised value of your home after required work has been completed.
  • Refinance option:If you're planning a renovation of your present home, you may qualify for refinancing with an FHA 203(k) mortgage. Contact FHA lenders for details.

The FHA 203(k) program also provides long term community benefits; local and state housing programs are partnering with FHA to provide affordable financing for homeowners wanting to improve their homes and neighborhoods. FHA lenders and local government offices can provide specific information for your area.


Karen Lawson
Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.