What Is an FHA 203k Mortgage?

The FHA 203k mortgage is the primary loan program permitting for the rehabilitation of single-family properties. Unlike many private loans, the 203k loan is streamlined to allow for one mortgage on the property before, during and after the rehabilitation process.

Benefit of One Mortgage

Private lenders will typically require three separate forms of financing to rehabilitate a property. The first is assessed at the initial value of the property before improvements. The next funds provide for repairs to the residence. Finally, a permanent mortgage can be arranged once the home is totally repaired and can be assessed at its new value. Having only one mortgage to carry through the entire process streamlines the process and reduces loan fees.

Goal of the 203k Program

The main purpose of the loan is to encourage development of neighborhoods and properties in need of significant rehabilitation. All borrowers must still meet the FHA's minimum credit requirements. These include a fair to good credit score, no bad debts and no previous loan defaults with federal lenders. The financing may also come in portions instead of a lump sum depending on the ultimate arrangement a borrower makes with a lender.

blog comments powered by Disqus