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Rehab and/or Renovation Purchase Mortgages (Section 203K)

FHA 203K is a government backed loan that provides loan opportunities for homeowners whose property needs major improvement. Often, lenders will not approve a mortgage due to deeming the house as 'uninhabitable' or other times a homebuyer must obtain a mortgage for a house and then acquire  additional financing to do the rehabilitation construction. With this federal government loan the borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. This program can also offer up to six month provision in mortgage payments so you can live elsewhere while your home is being remodeled.  FHA 203K is designed to encourage lenders to fund home purchases that need considerable renovations in hope of revitalizing depressed neighborhoods. 

The loan can include up to 20% for “contingency reserve” to cover more than estimated remodeling costs. The maximum loan amount is lesser than the two following criteria 1) the as-is value of the property plus repair costs, or 2) 110 percent of the estimated value of the property once you do the repairs. 
To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

Property eligibility includes:
  • One- to four- family dwellings
  • Homes that have been demolished or homes needing to be moved to rest on a new foundation
  • Decks/ patios, bathroom and kitchen remodels, disability access, flooring, plumbing, new siding and/or roofing, additions to the home such as a second story, and heating and air conditioning systems renovations
  • Work must be complete within 6 months

Property eligibility do not include cooperative units and luxury improvements such as adding a basketball court or pool. This program is not offered to investors or 'flippers'.

In order to apply, applications must provide: 
  • Proof of income and assets
  • Credit reports (minimum of 620)
  • Home appraisal, including how much the home will be worth after the improvements are made. 
  • A detailed proposal of the work required on the home, including a cost estimate of each repair. Must be at least $5,000 worth or repairs. 

If you are interested in buying a fixer-upper, this loan program may be the best option for you. Contact us today to talk to a 203K specialist. 


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Deneen Bernard: NMLS: 207094
Motion Mortgage: NMLS: 358334

Office: 540-424-5700
Direct:  540-376-4194

Fax: 866-700-0278


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