Financing Fixer-Uppers for the Financially Challenged

This article provides a brief overview of the Federal Housing Administration Section 203K Rehab Loan.

So you found your dream home—only it wasn’t a dream. No. It was a nightmare in dream’s clothing. As you crossed the threshold—wishing there was a door in it—your eyes widened with excitement as you imagined mahogany floors, granite countertops, stainless steel appliances, and French doors where the gold, paint-speckled linoleum floors (which coordinate nicely with the identically-colored linoleum countertops), mustard yellow appliances, and hollow pine doors now stand. Then came your next thought…  No, it wasn’t “SH!@#$%^T!” 


Your next thought was…How shall I finance this miracle transformation?


Believe it or not, there is still a rehab loan program out there for first-time homebuyers that won’t require you to give up your first, second, and third born.


Federal Housing Administration (FHA) 203K and Streamlined 203(k)


The Section 203(k) program is the Department of Housing and Urban Development’s primary program for to help homebuyers finance the rehabilitation and repair of single family properties. Investor can no longer use 203K loans. You must apply for the loan through an approved FHA 203K lender. The great thing is this program has the same down payment requirements as normal FHA loans (now 3.5 percent).


Through this program a borrower can get a single long-term fixed (or adjustable) rate loan that will serve to finance the purchase and rehabilitation. The loan amount and payment are based on the projected value of the property after the work is complete (as determined by a before-and-after appraisal report). And the great thing is that homeowners can finance such items as painting, room additions, decks, or they can make energy efficiency improvements.  The standard 203K loan has some really great benefits, including the fact that if you cannot move into your house while it is under renovation, up to six months of your mortgage payments can be used to finance repairs. 


Under normal circumstances, the property must be a one- to four-family dwelling that has been completed for at least one year and meets local zoning requirements. Coops aren’t eligible. The standard program typically applies to properties that need more extensive rehabilitation and construction (including structural repairs) but you can consult the FHA guidelines for more information.


The 203K Streamline program permits homebuyers to finance up to $35,000 into their mortgage to finish minor upgrades or improvements before they move-in and generally processes more quickly than the standard 203K loan.


Allowable repairs under the streamline program include:


•           Repair/Replacement of roofs, gutters and downspouts

•           Repair/Replacement/upgrade of existing HVAC systems

•           Repair/Replacement/upgrade of plumbing and electrical systems

•           Repair/Replacement of flooring 

•           Minor remodeling, such as kitchens, which does not involve structural repairs

•           Painting, both exterior and interior

•           Weatherization, including storm windows and doors, insulation, weather stripping, etc.

•           Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens

•           Accessibility improvements for persons with disabilities

•           Lead-based paint stabilization or abatement of lead-based paint hazards 

•           Repair/replace/add exterior decks, patios, porches

•           Basement finishing and remodeling, which does not involve structural repairs

•           Basement waterproofing

•           Window and door replacements and exterior wall re-siding

•           Septic system and/or well repair or replacement


As you well know, nothing processed through the government is ever “fast.” Ideally, streamline loans are supposed to close within 30 days but it typically can take 60 days (give or take a few weeks) to process loans under either program. For more information, please visit: or contact an FHA approved lender ( for more detailed information about the program.


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