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Before You Swing That Hammer… Learn About an FHA Rehab Loan

Bigger. Better. More Beautiful Than Ever.
Give Your Home Some TLC.


If you see a swan when others see an ugly duckling, then Federal Housing Administration (FHA) 203k rehab financing might be right for you. An FHA-insured 203k loan is the ultimate home makeover mortgage.
 
This financing can be used to improve a house or (approved) condo you’d like to purchase or as a refinance for your current home. Allowed improvements include1:
  • making structural alterations and remodeling
  • replacing your roof, plumbing or HVAC system
  • enhancing accessibility for a disabled person
  • making energy conservation enhancements
  • updating floor coverings and appliances
  • lead-based paint abatement or stabilization
 
The minimum loan amount is $5,000 and the total mortgage must be within the FHA mortgage limits for your area. Standard FHA guidelines must also be met in order to receive funding. Lower down payment requirements and less stringent credit requirements make this an attractive financing option for your fixer-upper.
 
In addition to qualified home improvements, your FHA-approved lender may let you include up to six months of mortgage payments so you can afford to live elsewhere during renovations. A contingency reserve may also be available to cover any costs renovation costs that rise above the approved estimates.
 
So, does your property qualify for this government-backed loan program?2
  • New-to-you one- to four-family home. YES
  • New construction less than one year old. NO
  • Dollhouse, LEGO house or doghouse. NO
  • Some condominiums. YES
  • Your current home that needs some love. YES (as a refinance)
  • A home that needs to be moved to a new location. YES

There are two types of FHA rehab loans. A regular/standard 203k is for structural repairs such as a room addition, while a limited/streamlined 203k is for non-structural modifications like weatherization or cosmetic changes.
 
If you’ve fallen in love with a fixer-upper or you’re tired of your existing home, then you should check out an FHA 203k rehab loan. Don’t live with ugly carpet or a leaking roof another day – it’s time to get started with your labor of love!
 



1 This list represents the types of improvements that may be allowable under the FHA 203(k) program. HUD requires that properties financed under this program meet specific basic energy efficiency and structural standards.
2 To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year and that conforms to all local zoning requirements. Any newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible. Eligible improvements include painting, additions, decks, and other improvements with the exception of luxury improvements. All construction projects or additions financed with 203k proceeds must comply with certain energy conservation standards and smoke detector requirements.



 
- By Lauren Howey, Sep 13, 2017



 
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