There are two types of 203(k) Rehabilitation Mortgages: Standard 203(k) and Limited 203(k).
- Standard 203k - The Standard 203(k) Mortgage may be used for remodeling and repairs. There is a minimum repair cost of $5,000 and the use of a 203(k) Consultant is required.
- Limited 203k - The Limited 203(k) may only be used for minor remodeling and non-structural repairs. The Limited 203(k) does require the use of a 203(k) Consultant. The total rehabilitation cost must not exceed $35,000. There is no minimum rehabilitation cost.
The 203k Mortgage provides FHA borrowers with the ability to purchase AND renovate at the same time using one loan, the purchase loan. This eliminates the need to purchase "AS-is" and then fund the project with your own cash or take out a separate loan.
- Purchase and refinance transactions
- One low interest first mortgage covers the purchase price(or existing lien amount) and proposed improvements
- All repairs/ renovations are performed after the loan Closes
- •Sales Price is always the “As-Is” Value on a Purchase (The seller is never responsible for repairs)
- Repair/Renovation funds are escrowed and draws are disbursed throughout the rehab process (Max 5 Draws)