Are you interested in purchasing or refinancing a home that needs repairs or alterations but you don't have enough cash to get the job done? If so, a 203(k) mortgage loan may be right for you. With this type of mortgage loan, funds are provided to pay the seller for the purchase or to pay off an existing mortgage if refinancing. Money for repairs is placed in the lender's escrow account, and draws are taken as needed to complete the work.
Requirements for this type of rehabilitation loan include:
- Minimum of $5,000 for repairs.
- Existing property must meet HUD's basic standards for energy efficiency and structural soundness.
- The value of the improved property must be within the allowable FHA county limit. The 2021 Broward FHA maximum loan amount is $402,500 for a single-family home.
The types of approved repairs and renovations are extensive and include:
- Structural alterations including razing the property to the ground and rebuilding as long as the existing foundation remains intact.
- Plumbing and electrical improvements
- Modernizing home's function and appearance
- Roof addition or repair
- Modifications to support disabilities
- Adding or replacing flooring
- Major landscaping work
- Improving energy efficiency
Because the lender will oversee the progress of the repairs, there may be additional fees for this type of loan, and not all FHA lenders offer this product. Check with your local bank, credit union, or loan originator for more information.