An FHA 203k Renovation Loan is a Federal Housing Administration insured loan used to renovate and/or improve an existing 1-4 unit home. Also known as “rehab loans”, an FHA 203k loan allows buyers to borrow the funds for both the purchase and renovation of a home giving the availability of “rehabilitating/remodeling” without the need of a second loan.
An FHA 203k Renovation Loan is designed to be used for more complex projects such as structural changes (room additions, exterior grading and landscaping) or reconstruction that would prevent you from immediately moving into the home. It is also used for renovations requiring engineering or architectural drawings and inspections. There is a minimum rehabilitation cost of $5,000 with restrictions only against luxury items such as installing a new swimming pool, saunas, tennis courts, exterior hot tubs, barbecue pits and satellite dishes.
An FHA 203k mortgage provides financing for both the purchase and renovation of a home rolled into one mortgage loan. Once the home is purchased and the loan is closed, renovation funds are held in escrow to pay for pre-determined renovation work to be completed by an approved renovation contractor.
Loan limits, credit qualification, down payment and other requirements are the same as standard FHA loans. Supplementary guidelines are set forth specific to 203k loans to provide for renovation of the home.
- Click here to see a detailed guideline of the 203k renovation process.