Many people either own a house that needs fixing up, or are thinking about purchasing a home which is affordable largely because it needs extensive repairs. Home repairs can be quite costly, however, and may not be affordable for those with less than ample budgets. There are also instances where the ability to pay back a loan on a house is not an issue, but a lender will still not allow a purchase for a variety of other reasons. This is where a 203k rehab loan can be the key to allowing you to own the home you have always dreamed of owning.

203k loans are government-based loans offered in situations where an investment would be considered high risk by the lender. The FHA's 203k rehab loan was created to provide homeowners with the resources to allow them to turn a damaged property into a livable home. From simple repairs to more drastic overhauls of a home, these loans are arguably the most reliable means of turning a questionable home into a sound investment, not to mention a sound dwelling. Generally, 203k loans are used to service homes in need of slight repairs, but they can be used for more involved improvements, and they cover the use of licensed contractors in the event that the loan borrower cannot complete the project without help.

The 203k rehab loans permit a wide variety of repairs to the home and surrounding area, but there are notable exceptions. Some of the repairs and work not permitted by these loans include landscaping and yard work, major remodeling, or fixing structural damage. It generally allows for more subtle repairs such as painting, addition or removal or doors, minor repairs or enhancements to kitchens or bathrooms, plumbing and electrical work and flooring, among many others. There are special terms and requirements that also come with each loan, including:

  • The property must be the borrower’s own
  • Work needs to be professional, and completed in a six month time frame
  • The property must not be vacated for more than a month
  • Depending on the situation, the borrower must possess a permit for the work done if one is required.

Despite some of the terms and limitations set forth by the loan, it is arguably the most helpful method for getting the necessary work done.