FHA Rehab loans

The FHA 203(k) loan program is gaining in popularity for several reasons. The main reason seems to be the purchasing of so many homes that have been abandoned or are purchased from banks as foreclosures. Many times these homes need some or a lot of work to make them meet the expectations of the buyer and/or of the lender. Here is where the Rehab loan comes into play. The total loan size can be 96.5% of the value after the repairs/upgrading has been done.

For example, a home is purchased for 100,000 and when fixed up will be worth 135,000. The loan can be for as much as 130,275. In this case as long as the work costs less than 30,000 the buyer purchases a home that they want for the price they can pay. The great thing is that normally investing 20,000 into a 100,000 home increases the value at least 30%.