FHA 203(k) - Rehabilitation Loan 

The Federal Housing Administration offers a rehabilitation loan for the repair of single family properties. This is known as an FHA 203k loan. It is essentially a home improvement loan. It is a very important tool for the community and neighborhood revitalization and also to expand homeownership opportunities. These are some of the reasons behind the FHA mission and it is why they intend to continue to strongly support the program and the lenders that participate in it. 

Lenders in conjunction with state and local government agencies, have found ways to combine the FHA 203k loan with other financial resources, such as HUD's HOME, HOPE, and Community Development Block Grant Programs, to assist borrowers in purchasing qualified homes for the FHA 203k loans. Several state housing finance agencies have designed programs, specifically for use with FHA 203k loan and some lenders have also used the expertise of local housing agencies and nonprofit organizations to help manage the rehabilitation processing. 

The FHA 203k loan program is also an excellent means to demonstrate to HUD the commitment to lending in lower income communities and to help meet their responsibilities under the Community Reinvestment Act (CRA). HUD is committed to increasing homeownership opportunities for families in these communities and Section 203(k) is an excellent product for use with CRA-type lending programs. 

203(k) FHA Program - How can it be used?

This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways: 

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it. 

To refinance existing indebtedness and rehabilitate a dwelling; 

To purchase a dwelling and the land on which the dwelling is located and rehabilitate it, and to refinance existing indebtedness and rehabilitate such a dwelling, the mortgage must be a first lien on the property and the loan proceeds (other than rehabilitation funds) must be available before the rehabilitation begins.