What Is a FHA 203k Rehab Loan?

The FHA 203k loan option allows you to get just one loan to cover the cost of purchasing and rehabilitating a property. Typically, you would have to get an initial loan to purchase the property, a loan to rehab the property, and a third loan to permanently finance the ownership. The 203k option removes these steps if you qualify.

Qualifying for an FHA Loan

You will need to meet basic financial qualifications in order to source an FHA loan. While your income may be slightly lower than average, your income to debt ratio must be healthy. You should also have a good credit history and stable employment. You will also need at least 3.5 for down payment and approximately 2 to 3 percent for closing costs.

Qualifying for a 203k Loan

The 203k loan in particular relies on your plans for the property once it is purchased. You will have to submit these plans before you are able to allocate financing. Ultimately, the FHA lender wants to know your plans will add value to the property and increase its livability in order to protect your investment.

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