An FHA Rehab Loan, also known as a 203(k) loan, allows homebuyers or homeowners to finance both the purchase (or refinance) and the cost of renovations in one loan. It’s a government-backed program with low down payments and flexible credit requirements, making it easier to buy and upgrade a home in need of repairs.
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n FHA Rehab Loan works by combining the cost of buying or refinancing a home with the funds needed for renovations into one single loan. Here’s how it works:
Apply for the Loan: You apply through an FHA-approved lender who will assess your financial situation, including credit score and income.
Property Evaluation: The property is evaluated to determine the cost of necessary repairs or upgrades.
Loan Approval: Once approved, the loan amount includes the purchase price (or refinance amount) plus the estimated renovation costs, which are determined by a contractor’s bid.
Renovation Process: The renovation funds are held in an escrow account and released as work is completed. The contractor completes the repairs, and the funds are paid out in stages.
Paying the Loan: Once renovations are done, you repay the loan through monthly payments, typically over 15 to 30 years, just like a standard mortgage.
This streamlined approach makes it easier for buyers and homeowners to renovate a home without needing separate financing for repairs.
Answer a few questions to get a personalized offer.