A Little Known FHA Loan: The 203(k)

Currently, in this real estate market, there are numerous homes that have gone to foreclosure or have sustained a great deal of damage, whether through neglect or a natural disaster. There is a little known FHA loan that strives to help people acquire and repair these homes. The “203(k) Rehabilitation Loan” allows a home buyer to put the cost of repairs, improvements, and upgrades into the FHA home loan.

The program is not used as much as it should be because many lenders don’t make it available and don’t train their loan officers on how to originate this type of loan. CREFCO’s loan officers are trained to originate this loan, and we strive to help customers achieve the right loan for their home.

Under a 203(k) FHA loan, all repair, improvement, and upgrade costs can be built directly into the buyer’s purchase loan. Performing the right type of improvements (kitchen, bathroom, landscaping, new flooring, etc) can significantly raise the value of the home, building equity for the home owner. These improvements can also be used to install energy-efficient components, such as windows and insulation, which will create monthly savings on energy bills, helping to offset monthly mortgage payments. The only things the program can’t be used to install are luxury items, such as swimming pools.

These are the additional benefits to the 203(k) Rehabilitation Loan. All the original FHA loan benefits, such as 3.5% down payment and low fixed rates, are still standard in this type of loan. Similar to other FHA loan programs, this loan must be used for a primary residence. In fact, if you are already in an FHA loan for your home, it is also possible to streamline refinance into a 203(k) FHA loan.

You can read more about this loan at the US Department of Housing and Urban Development’s site here.

Visit CREFCO to begin your application for this loan or call us toll free at 866-854-4242.