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203K Loans Rehabilitating Homes with No Equity

September 14th, 2011

The FHA 203K is one of the most popular home improvement loan options for borrowers looking to rehabilitate a residential property. The 203K is a basically rehab loan. Under the 203K loan, FHA allows you to purchase or refinance a home and roll the costs of the rehabilitation project into the mortgage. With house values continuing to struggle, adding in the cost to renovate can still get you a very affordable monthly payment.

As you may already know FHA interest rates are ridiculously low. In today’s mortgage environment, home improvement financing is more difficult to find.  Getting a second mortgage a few years ago was easy but today, most lenders are looking for more equity. The 203K loan doesn’t require equity and FHA allows home equity mortgages up to 115% loan to value. (203k loan is always held in 1st position)

Much like a standard FHA mortgage, consumers can get into a home with only a 3.5% down-payment and FHA allows the seller can assist with the loan closing costs. The FHA loan program is very popular with first time home buyers because of the low down payment. The 203K loan is most attractive to a borrower considering buying or refinancing a property that needs to be fixed up. Whether you need to add a room, remodel, or install a swimming pool, the 203K loan is unique option for financing home improvements.

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