I am sure you have seen all the TV shows on HGTV about fixing up homes, but do you wonder how they buyer's afford to do them? We have the secret for you! There are many options to go about doing a fixer-upper, but one of the most commons ways to do so is by using the FHA 203K Rehab Loan.

How It Works

Sometimes when you are searching for homes you come across what could be the perfect home. The location is great, size is perfect; but then your real estate agent says sorry this home doesn't qualify for your loan type because it needs improvements done. This just might be the perfect time to use the 203K rehab loan. 

The 203K Rehab loan allows you to buy and make improvements to the home all under one loan. 

Cost of the Loan

Down Payment: For the FHA 203K rehab loan you can put down as little as 3.5%, but there are great reasons for making a larger down payment when you can. 

Interest Rate: The interest rate will vary depending on the rates at the time you are purchasing and also your credit score. To learn what today's current interest rates are 

Which Repairs Qualify? 

Based on the extend of the fixer-upper you choosing the 203K rehab loan can cover things similar to structural repairs, garages, remodeling, plumbing, flooring, electrical, roof, siding, etc. 

What Homes Qualify? 

1. A home that needs repairs as listed above

2. A 1 to 4 family home that is older than 1 year

3. A home that has been torn down, but the original foundation is still in place  

4. A home that you want to move to a new location

Some of these can require extra steps and must still apply to FHA loan limits, it's best to always consult your agent and mortgage professional. 

Step by Step Process

1. Find Your Property: Let the house hunting for a fixer-upper begin with the help of your agent. Agent will negotiate contract for you. Once you have your offer accepted ready for step 2!

2. Choose your contractors: Many lenders have preferred contractors that they have worked with in the past with on 203K rehab loans. This part is important because there is additional documentation required for this loan so it's important to have a contractor who has been through a 203K rehab loan.

3. Contractor agreements: Collect bids until you found a contractor that will work. Once you have your contractor in mind written agreements will be drawn up. 

4. Appraisal: Appraisal is then ordered to confirm what the properties value will be after all repairs are completed. 

5. Approval: All contractor agreements and appraisal must be approved by the underwriter prior to closing.

6. Closing: Once lender has approval from underwriter we can then close on the home. 

7. Begin Renovation: Renovation will begin per the contracts with the contractors. 

8. Renovation Ends, MOVE IN! Once all repairs have been completed by the contractors the home will be inspected by HUD. Once we have approval from them, it's moving day! 


1. TIME: The contract timelines can be longer than a standard loan because there is additional paperwork and different parties involved in the translation. In addition your move in date is typically much longer due to waiting for repairs to be completed and signed off by HUD. 

2. PAPERWORK: 203K rehab loan have additional paperwork required for contractors and lender. 

3. COST:  The cost of the renovations might be more than you are expecting because a licensed contractor must be the one to complete the work. Sometimes through small home projects we do them ourselves or hire handyman, but in this case only a licensed contractor can complete the work which can result in a higher renovation cost. 






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