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FHA 203k Rehab Loans

FHA 203k Rehab Loans are available for the recovery (rehabilitation) and repair of single family homes.  When you get right down to  it an FHA 203(k) Rehab Loan is a home improvement loan.  Because of this, many lenders are using them to work in partnership with state and local housing agencies and related non-profits to revitalize lower income communities.

These loans are good for both you and the lenders.  The lenders get “brownie points” with HUD (Department of Housing and Urban Development; a part of the Federal Government) and other governmental organizations by fulfilling their responsibilities under the Community Reinvestment Act (CRA).

Also, FHA 203k loans have been successfully combined with HUD programs such as HOME, HOPE and Community Development Block Grant programs.  Plus, several states and local housing agencies actually have created programs that work “hand-in-glove” with FHA 203k Rehab Loans.

This is very good for you because you have  the opportunity to obtain more assistance with your home purchase.  That assistance can be both financial and administrative (helping with the application and compliance process) depending upon the program and the sponsoring organization/agency.  Be sure to check these “loan combinations” out… You may be very glad that you did.

Here are a couple of ways that you may be able to use an FHA 203k Rehab Loan to help you get into your home:

  • To make it possible to provide you with the money to buy and rehabilitate a property (home and land).
  • To move a home from another property to the land you are buying.  This use may include putting in the foundation that you wish to set the home on.
  • You can also get an FHA 203-k rehabilitation loan to refinance a home that you already own so you can repair and rehabilitate it.
  • To rehabilitate a home and land that you want to they get an FHA 203b fixed-rate mortgage on.  You would want to do this because the home that you are buying may not meet FHA quality guidelines.
  • Etc. – Be creative with your ideas… All they can do is say “No.”  Just don’t go far enough in the process that it costs you money.

Some rules that you must be aware of when you get an FHA 203k Loan are:

  1. If you are moving a home from another property to place on a new foundation and are going to rehabilitate it, the following 3 rules apply:
    • You will not be able to get the money from the loan until the house is attached to the new foundation. This means that you will need to put up the money to:
      1. Dig the basement/foundation related holes;
      2. Build the foundation and basement (if any);
      3. Move the structure to the new property; and,
      4. Do anything else that you will need to do to move the structure and prepare your new property to receive the home.
    • The 203k mortgage must be the first lien on the property.
  2. If you are going to purchase an existing home and the land on which it is located and rehabilitate it, the following rules apply:
    • The mortgage must be the first lien on the property; and,
    • The money from your mortgage loan (for instance an FHA 203b home loan) must be available (i.e. the loan is approved and the funds are in escrow) before you begin rehabilitating the property for which you got the FHA 203k loan.
  3. If you are going to refinance an existing home and the land on which it is located and rehabilitate it, the following rules apply:
    • The mortgage must be the first lien on the property; and,
    • The money from your mortgage loan (for instance an FHA 203b home loan) must be available (i.e. the loan is approved and the funds are in escrow) before you begin rehabilitating the property for which you got the FHA 203k loan.

As long as you have acceptable credit, have regular income above the minimum level required and are using your FHA 203k Rehab Loan in an approved way, I believe that you will have little or no difficulty getting an FHA Rehab Loan.