Comparing the Advantages and Disadvantages of FHA 203K Rehab Loans

The FHA 203k rehab loan is one of the most popular rehab loan program that the government offers. Through the Department of Urban Housing, the FHA offers this loan as a means to help people buy and fix up property. For those that wish to get into the rehab of a property, this represents one of the few loan options that they have. While the FHA 203k rehab loan offers buyers some unique advantages, it is not without its fair share of disadvantages as well. Here are a few things that you will need to consider about the FHA 203k rehab loan.

Advantages

  • Get a rehab loan- The biggest advantage that this program presents you is the ability to get a rehab loan on a property in disrepair. Most of the time, traditional lenders will not even touch a property that is in bad shape. They require that the property is up to code before they will even consider lending against it. Therefore, to find a loan that is insured by the government, many buyers could not be happier.
  • Low interest rates- When you work with the FHA, you are going to get a very competitive, reasonable interest rate to work with. The FHA allows lenders to get access to some great rates and this program is no exception.
  • Improve neighborhoods- The government realizes the importance of improving the country one step at a time. Many houses that have been built for many years are now in very bad condition. Without a means to finance the repairs, many people simply leave them sitting vacant. This creates an eyesore for the community and often leads to decreased property values for the neighbors.
  • Easier credit approval- Anytime that you work with the FHA, you are going to have an easier time getting approved for a loan. When the FHA is involved with a loan, they are willing to guarantee it for you. When they do this, it makes the credit decision on the part of the bank a lot easier. If you are on the borderline of being approved by yourself, having the FHA involved will usually tip the scales in your favor. 

Disadvantages

  • Slower process- Anytime you involve a government agency, such as the FHA, you are going to have a slower time getting everything approved. You will have to go through the normal channels with your lender of choice to get the loan approved. In addition to that, you will also have to go through some more paperwork with the FHA. This requires a lot of patience from those that choose to get involved with this loan program.
  • Rules and regulations- When you get involved with the FHA 203k rehab loan, you are going to have to do things by the book. The FHA has a certain way that they like to do things and you have to follow protocol. This is not as simple as other types of loan programs. 
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