A 203(k) type of FHA mortgage can provide a single, fixed rate loan on a refinance mortgage or purchase of a home, plus money for property rehabilitation, or home improvement.
FHA 203(k) loans cover the purchase or refinance and rehab of a home that is at least a year old. A portion of the mortgage proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as repairs are completed.
The cost of the property rehab must be at least $5,000. The value of the property is determined by either (1) the value of the property before rehabilitation plus the cost of rehabilitation, or (2) 110 percent of the appraised value of the property after rehabilitation, whichever is less.
FHA mortgage lenders may charge additional fees, such as a supplemental origination fee, fees to cover the preparation of architectural documents and review of the rehabilitation plan, and a higher appraisal fee.
Condominium units may be insured if they are in projects that have been approved by FHA or the Department of Veterans Affairs, or meet certain Fannie Mae guidelines.
The extent of the home rehab covered by FHA loans 203(k) can range from relatively minor to virtual reconstruction: a home that has been demolished or will be razed as part of rehabilitation is eligible.
Types of home improvements allowed with an FHA refinance or home purchase:
FHA 203(k) loans cover the purchase or refinance and rehab of a home that is at least a year old. A portion of the mortgage proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as repairs are completed.
The cost of the property rehab must be at least $5,000. The value of the property is determined by either (1) the value of the property before rehabilitation plus the cost of rehabilitation, or (2) 110 percent of the appraised value of the property after rehabilitation, whichever is less.
FHA mortgage lenders may charge additional fees, such as a supplemental origination fee, fees to cover the preparation of architectural documents and review of the rehabilitation plan, and a higher appraisal fee.
Condominium units may be insured if they are in projects that have been approved by FHA or the Department of Veterans Affairs, or meet certain Fannie Mae guidelines.
The extent of the home rehab covered by FHA loans 203(k) can range from relatively minor to virtual reconstruction: a home that has been demolished or will be razed as part of rehabilitation is eligible.
Types of home improvements allowed with an FHA refinance or home purchase:
- structural home alterations and reconstruction
- functional modernization and improvements
- 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