What is the FHA 203k Loan Program?
The Federal Housing Administration has loan programs to assist individuals with home ownership and one of these programs is the FHA 203k loan. This loan program is not one to purchase a new home, but to purchase and remodel an existing home. These loans are for individual families and investors.
The goal of the program is to enable individuals to purchase and maintain their own home, and to add to the revitalization efforts in certain communities, improving already existing properties while making home ownership a dream come true. This is a type of home improvement loan. A future loan holder can do several different things with a FHA 203k loan. An individual can purchase an already existing home and improve the dwelling, purchase a home and have it moved to another foundation or take out the loan to eliminate some debt and to improve their dwelling. Improvement to the dwelling must be the cornerstone of the loan.
Typical covered repairs include item such as;
- Repairs to the roof, either replacement or just site repairs. Adding in skylights would be included here.
- Adding or replacing siding, fixing cracks or settling foundation problems.
- Adding whole house air conditioning, replacing the furnace or updating the entire system, including upgrading the electrical system throughout the house.
- Any improvements needed to make the home accessible to a disabled individual.
- Other types of repairs, as quoted by the contractor.
There is a minimum requirement of at least 5,000 dollars needed in repairs for the individual and the home to qualify for the loan. After the 5,000 dollars in repairs are met, there can be additional items such as adding in an additional bathroom, etc., to the home. In addition, the construction of a new dwelling, such as a garage, can be considered under the FHA 203k loan, however, the structure must be attached to the dwelling in some way.
The borrower may select the contractor of his or her choice, but that contractor must meet the requirements from the Federal Housing Administration to be eligible to work on the property. If the homeowner is capable of doing the majority of the work themselves, they must prove this fact to the FHA prior to any work being done on the covered property. Of course, it goes without saying that all work on the property be completed according to the regulations and codes of that area in regards to permits and building codes.
The Federal Housing Administration also has a unique version of this loan program that is streamlined to include both the purchase of the home and the rehabilitation loan all rolled into one loan. This is convenient for the borrower as the total amount is one set payment, not one payment for their mortgage and another payment for the home improvement loan. You can visit the Federal Housing Administration website where you can find out much more detailed information on the FHA 203k loan program.