Rehab Mortgage Is It Right For Me

Dated: 05/01/2019

Views: 128

"Rehab Mortgage" Is it Right for Me? I've been asked this many time by my clients. The Federal Housing Administration (FHA) offers a unique program that may be a good fit. It's called Section 203(k) Rehab Mortgage Insurance. This program is a good fit if you are interested in buying a home that requires significant repairs or upgrades which you may need help financing them. 

Up until recently, buyers needed to pay for these expenses themselves or secure a home improvement loan which was usually at a higher rate in addition to their mortgage.  With the 203(k) program, borrowers can wrap the rehabilitation costs and the purchase costs into a single mortgage at a competitive rate. Like FHA, the downpayment can be as low as 3.5 percent. Borrowers can also select either fixed or a variable rate loan, up to 30 years.

There are a few limitations and features of this program:

  • All work must be performed by contractors that have been pre-approved by FHA

  • The property must meet certain energy efficiency and structural standards

  • These loans can also be used to convert a property of any size into a one-to four-unit structure; owners of condo's or townhomes can use it for interior projects.

  • The property value must meet certain criteria. The lesser of 2 calculations: 1) the rehab costs plus the value before the rehab; or 2) the appraised property value after the rehab must equal a minimum of 110%

  • The value of the property must fall within the FHA mortgage limits for the area

  • Investors are not eligible, only owner/occupants and non-profits can use the program

  • Improvements as little as $5000 to complete reconstruction of the home are eligible as long as the existing foundation remains intact

  • The application must be submitted through an FHA approved lender

To learn more about this program contact me at jennifer@welcomehomefrederick.com or visit hud.gov/program_offices/housing/sfh/203k.


Image title

Blog author image

Jennifer Burns

Jennifer was born and raised in Maryland and for the last 21 years has resided in Middletown, MD. Upon finishing her studies at the University of Maryland University College with a Bachelors degree in....

Latest Blog Posts

The Housing Slowdown May Be Coming To An End

The Housing slowdown may be coming to an end....The housing slowdown we've experienced since last summer may be reversing this fall which is a boon for sellers and not so much for buyers. Last

Read More

Frederick Maryland You Are Making Us Hungry

Downtown Frederick has become a real haven for culinary options. The choices continue to grow and people from all over the DC metro area visit our historic town to enjoy a meal or two 

Read More

Best Resources To Be In The Know

Are you brand new to Frederick??  Or maybe you lived here for a while and you feel out of the loop??!   As a transplant of 9 years to Frederick, I can certainly say I have

Read More

5 Must Dos Around Frederick For The Best Summer Ever

As I write this today, we are finally over the cold (fingers crossed!).   The sun is out, and it's got me thinking of all the fun things to look forward to as the weather heats up!Here are

Read More