What is an FHA 203k loan?
An FHA 203k loan, (sometimes called a Rehab Loan or FHA Construction loan) allows you to finance not one, but two major items.
1) the house itself, and;
2) needed/wanted repairs.
Because the lender tracks and verifies repairs, it is willing to approve a loan on a home it wouldn’t otherwise consider.
The loan addresses a common problem when buying a fixer upper type home: lenders often don’t approve loans for homes in need of major repairs.
A home must meet certain safety and livability standards. Some home buyers are handy enough to buy the house and fix it up themselves. But, if the home is too run down, it won’t qualify for a conventions loan which will prevent most people from obtaining one and missing out on a great opportunity. The 203k loan is an option for buyers to finance both the cost of the “fixer upper” home and the repairs/updates with one transaction despite its initial condition.
The contractors must be a licensed and insured business. You can’t use buddies who do construction on the side, and you typically can’t do the work yourself unless you’re a contractor by profession.
Best results will come from super-experienced and professional remodeling firms that have done at least one 203k renovation in the past. Remember: your entire project can be held up by one contractor that is unwilling to complete the necessary forms. You might even go so far as to write the 203k paperwork requirements into the contractor agreement.
Pappas Contracting is a 203K Loan Certified contractor. We have the skills, team and experience to ensure your project is completed according to the FHA loan regulations.