FHA Rehab Home Loan 203(k)
The Federal Housing Administration (FHA) has made available a program strictly for borrowers that allows for the purchase of and subsequent rehabilitation of the property under the 203(k) program.
Historically, and currently with some conventional financing, multiple loans were needed in order to acquire financing for a project that needed rehabilitation. The home loan itself, the rehab loan, then a final long term loan that was established after the completion of the rehab project.
FHA 203(k) rehab loans are a perfect solution to this as only one loan is needed. The loan is based upon the projected value of the home, with one portion paid to satisfy the purchase, and the rehab monies escrowed and distributed (often a licensed contractor is needed) throughout the project. Once the project is done, the borrower is left with the balance of the full note to pay on.
This program has really helped to enable people to get into homes that they have a vision for, and helped the government invest into areas and houses that need rehabilitation. When taken into account the bad credit home loan that the FHA is known for and rehab money for a neat project, this makes for a lot of options for you the borrower.