What is a 203(k) Rehab Mortgage?

There are two types of the 203(k) Rehab Loans: A Full 203(k) and a more limited Streamline 203(k).  The differences between these two types of loan programs vary slightly; a HUD Consultant being required on a Full 203(k) Renovation Loan and not required on a Streamline 203(k) Loan, however some lenders do require a Consultant on Streamline Loans.

The Full 203(k) will allow for structural remodeling and room additions, where the Streamline does not.  Local building permit requirements apply to both, as required by law or local governance. The following information describes both programs.

What it is:
Section 203(k) insurance enables home buyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home. This is like a 2 in 1 loan with the construction loan portion wrapped into one first mortgage.

Section 203(k) fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment. However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.