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FHA 203(k) Rehabilitation Mortgage Insurance Program

What is the 203(k) Rehabilitation Mortgage Insurance Program?

The Section 203(k) Rehabilitation Mortgage Insurance Program allows homebuyers or homeowners to purchase or refinance and rehabilitate a one- to four-unit single family property with a single mortgage loan.

The total mortgage amount on the property, including the cost of the repairs, must fall within the FHA mortgage limit for the area.

A portion of the loan proceeds is set aside in an escrow account and released as rehabilitation is completed.

The extent of the rehabilitation covered by Section 203(k) financing may range from relatively minor to near total reconstruction.  Luxury items and improvements that do not become a permanent part of the property are not eligible uses of a 203(k) loan.

There are two types of 203(k) rehabilitation mortgages: Standard 203(k) and Limited 203(k).

The Standard 203(k) mortgage may be used for remodeling and repairs.  There is a minimum repair cost of $5,000 and the use of a 203(k) Consultant is required.

The Limited 203(k) may only be used for minor remodeling and non-structural repairs.  The Limited 203(k) does not require the use of a 203(k) Consultant.  The total rehabilitation cost must not exceed $35,000.  There is no minimum rehabilitation cost.