(also called a Rehab Loan)
With equity dropping and the economy on shaky ground it can be very difficult to find a lender to lend enough cash in order to do your needed or wanted home improvements. But here is your solution!
Most major lenders do NOT carry this loan but luckily this site will educate you as well as show you how to find a lender who does carry this rare and effective government program!
The Section 203(k) loan allows a qualified borrower to borrow up to 110% of the FUTURE value of the home (the value after improvements are completed!). This and other aspects make this loan incredibly unique and valuable to many homeowners in search of doing home improvements that they can’t pay for out of pocket.
The Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) helped create as well as insure these loans, allowing FHA approved lenders to bring this loan to the public. [To get in contact with an FHA Approved Lender click here.] HUD & FHA’s main focus is on neighborhood revitalization and on expanding home ownership. This loan plays a key role in backing these goals. The loan can apply to a Purchase loan or a Refinance loan.
HOW DOES A 203(k) WORK?
After the loan funds the money for the home improvements is placed into a separate Escrow Account. Then after funding the construction work begins and draws are paid (usually to a General Contractor) as the improvements are being done to the home. Most 203(k) loans involve a Trained and Approved 203(k) Home Inspector (or “Consultant”) who inspects the construction work as it is done and who also approves the draw requests.
There are some differences between Purchase Loans and Refinance 203(k)’s. For more info go to the Purchase vs Refinance 203(k) segment of the MORE INFO section.