Renovation, Rehab & 203k Loans
FHA 203(k) GENERAL INFORMATION
The 203(k) loan program is designed to finance real estate and real estate repairs and improvements in one loan.
It may be used for both the purchase or refinance of owner occupied 1 to 4 unit properties.
Most mortgage financing plans provide only financing for the purchase of a
completed home or for new construction and do not allow for any repair on
an existing home. That is, a lender will not usually give a loan on an
existing home if it needs repair because, typically mortgage proceeds can
not be released unless the condition and value of the property provide
adequate loan security. When rehabilitation is involved, this means that a
lender typically requires the improvements to be finished before a long-term mortgage is made.
When a buyer wants to purchase a house in need of repair or
modernization, he/she usually has to obtain financing first to purchase the
dwelling, again to start the rehabilitation/construction, and once again
when work is completed to pay off interim loans with a permanent
mortgage. Often, the interim financing involves relatively high interest
rates. The 203(k) Rehabilitation program was designed to address this
situation. With 203(k), the borrower can get just one mortgage loan, at a
long term fixed or adjustable rate, to finance both the acquisition and the
rehabilitation of the property.
What type of properties are eligible? The property must be a 1– 4 family
dwelling or, at the very least a foundation, that has been existing for at
least one year. Mixed use properties are acceptable provided they follow
certain guidelines and no 203(k) funds are used for rehabilitation of the
commercial portion of the property. Contact your lender for exact
qualifications. Cooperatives are not acceptable, but townhomes and
condominiums may qualify.
HOW CAN THE 203(k) BE USED?
- To purchase a dwelling and the land on which the dwelling is
located and to rehabilitate it
- To purchase a dwelling on another site, move it onto a new
foundation, and rehabilitate it
- To refinance existing indebtedness and rehabilitate a 1 to 4 unit
- To rehabilitate a 1 to 4 unit building
- To convert an existing structure to a 1 to 4 unit building
- To rehabilitate the residential portion of some mixed use properties
For More information call:
Daniel Lehman at Prime lending 708-945-0103
Millie Ruiz-Wagner Peoples Home Equity 708-945-3315