You can buy a house with an FHA 203k loan to Acquire and Rehab a property. The basic FHA eligibility requirements apply such as the minimum 3.5% (of purchase price) down payment requirement. Also the minimum 620 mid FICO score is required by most all lenders for these types of FHA loans.
The 203(k) Rehabilitation Mortgage Program is the official name of this program and it is offered through the FHA (Federal Housing Administration) which is part of HUD (U.S Department of Housing and Urban Development). Links to direct detailed information from HUD are provided below.
This loan provides funds for the acquisition and rehabilitation which can be repairs and improvements. The Streamlined version of the 203k is the most common and applicable sub-set of the program in that most people don’t do projects that go over the $35,000 rehab limit. The 203k program in any case requires a minimum of $5,000 of repairs or improvements. The Streamlined 203k is also the most common in that any FHA approved lender can originate a Streamlined 203k mortgage.
203(k) Streamlined Limited Repair Program (up to $35k in repairs)
This program is great in that it permits home buyers and even home owners to finance up to $35,000 into their mortgage to repair, improve, or upgrade their home. The money is put in to an escrow account and funds are drawn for the repairs. The repairs or improvements need to be identified by a home inspector or an FHA appraiser. The buyer or home owner can be present when the inspector or FHA appraiser reviews the home so as to discuss what repairs or improvements are in mind.
This loan program is also a great option for Sellers to prepare their home for sale by helping to make the home very marketable and increase the net profit. This loan program is also a great option for Buyers to make their new home move-in ready by doing renovations how they want it done. The general guidelines or list of repairs and improvements that can be done with this program are as follows.
- structural alterations and reconstruction
- modernization and improvements to the home’s function
- elimination of health and safety hazards
- changes that improve appearance and eliminate obsolescence
- reconditioning or replacing plumbing; installing a well and/or septic system
- adding or replacing roofing, gutters, and downspouts
- adding or replacing floors and/or floor treatments
- major landscape work and site improvements
- enhancing accessibility for a disabled person
- making energy conservation improvements