This program assists buyers who want to purchase a home with as little as 3.5 percent down and either need or want additional funds to make repairs to perform renovations. Funding for improvements are not limited to the repairs necessary to pass an FHA inspection. The buyer can finance repairs and improvements up to $35,000 in excess of the purchase price. The cost to purchase and renovate is combined into a single loan amount.
Typically, a buyer will be approved by the lender for the purchase price of the home plus the cost of repairs and improvements. A contract to purchase is negotiated just like any other deal between buyer and seller. There is no dollar amount or mention of any improvements in the contract.
After the contract is signed, the buyer meets with an approved contractor to get a written work estimate for the items needed to repair or personalize the home. An application is processed and an appraisal is done, based on the after-improved value of the home.
After closing, the funds in excess of the purchase price are disbursed directly to the contractor as work is completed.
The FHA 203k program is, hands down, the best renovation loan product available to buyers. FHA makes home ownership affordable.
