What is a 203K Loan?

An FHA 203k Loan is a rehab loan backed by the Federal Housing Authority. It allows home buyers to borrow to make repairs to a property after closing.

Why would I use a 203K Loan?

Typically for most conventional loan approvals the property has to be habitable and pass inspections.  Many times the seller can not fix problems that may arise such as furnace issues, old roof, peeling lead paint, non-functioning plumbing or electrical systems.  When these deficient conditions exist, a bank may deny a conventional loan application.  If you apply for a 203k Rehab Loan, however,  you may be able to borrow enough money to purchase the home AND make pre-approved repairs after closing.

How much can I borrow with a 203K?

A 203k Streamline loan is the simplest, most straight forward product.  The maximum  loan amount in a streamline is roughly $35,000 depending on the value of the house.  The “post completed” value of the home needs to be equal to or greater than the total loan.  A Standard 203k can be used for much larger jobs and can lend loans upwards of $100,000 above the purchase price!  This tends to be used by contractors for homes in desperate need of repair.  They require much heavier leg work and sometimes require a higher down payment and interest rate.

How 203K loans work:

At the closing you’ll be signing paperwork for one loan, but the seller is paid out the purchase price while the contractor receives up to half the construction costs to get the job started.  The bank then requires “requisitions”, or proof of work, from the contractor to disperse funds.  An inspector needs to approve the requisitions to allow the contractor to be paid.  The bank typically holds back 10% until the job is completed to ensure the satisfaction of you, the homeowner, and the inspector.

What can I do with my 203K rehab loan?

The beauty of the program is what you can use the funds for.  Generally they’re used for major repairs; New roof, septic, heating, electrical and plumbing systems.  But they can also be used to increase the energy efficiency of your home!  You can also use the monies to pay for up to 3 full months of mortgage payments while you perform the work!  Many people may want to use it for cosmetic repairs.  As long as you can show the room in question is “in need of repair” you can use those funds to help finance a beautiful new kitchen.

All in all the FHA 203k Loan is a fantastic product.  It may take a bit extra work but by opening a wide range of possibilities for home buyers it can make your dream home available within your budget.  A number of lenders offer this product including Noah Anacleto who can be reached at (401)-847-4747.  Call any of our experienced agents to discuss creative loan strategies or the local real estate market.

Posted by Jeff Brooks on


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I am currently at work and im unable to talk on the phone till 6PM - EST tonight. Ill just give you a quick run down.

My credit score on experian is 580. my annual salary is 55,000.00. I have 50,000 in savings i would like to put a down payment of 20,000.00 and finance 150,000.00 home is 139,000.00 hopefuly i can get it to 125,000.00 and use the rest of the money for renovations as this hows is a fixer-upper. my Outstanding debts are 11,000 in student loans, 90.00 collectiongs and 2800.00 (total debt 13,000)for some random other collection which ill be paying these off in the next 3 weeks. starting with collections first. If this isnt do-able to get me approved i dont want to waste your time.

Posted by johnny on Tuesday, May 5th, 2015 at 2:48pm


Thank you for the question, it sounds like you're looking to take on quite the project. I'd recommend you speak with your local bank, or whichever bank you do your banking ith to see if they can pre approve you. They'll be able to tell you directly what to expect for rates, monthly payments and what you can do to be approved for more or for a better interest rate.

I hope this help. Any further questions please feel free to call or email me

Posted by Jeff Brooks on Thursday, July 9th, 2015 at 6:04pm

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