The FHA 203K Rehab Loan

Even though many mortgage products which existed a year or so ago are now gone the way of the dodo bird, the product which would help you accomplish your objective still exists and is doing very well. Basically, what you are looking for is an acquisition/rehabilitation loan. Given the amount of money you are looking to spend on repairs, probably the best program around right now is a loan insured by the Federal Housing Administration called the Streamline 203(k).

With the Streamline K you can obtaining 97% financing on the lesser of a) the cost of the property plus the cost of repairs or b) 110% of the value of the home after it is improved. So, using your example, someone who otherwise qualified for FHA-insured financing would be able to get a loan for 97% of $118,000 or 97% of 110% of what the house would be worth after fixing it up, whichever is less.

The Streamline 203(k) allows for up to $35,000 worth of repairs for the following types of work:

• Repair/Replacement of roofs, gutters and downspouts
• Repair/Replacement/upgrade of existing HVAC systems
• Repair/Replacement/upgrade of plumbing and electrical systems
• Repair/Replacement of flooring
• Minor remodeling, such as kitchens, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/replace/add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement.

More complex types of work, however, are not eligible; if required, such repairs must be done through the more complex "traditional" 203(k) program.

Hopefully the foregoing will help you along your path to buying and fixing up that home. Before I finish, though, another thing you will like to know is that you can get down-payment assistance (such as a seller-funded grant from a non-profit) in connection with Streamline 203(k) loans and if you cannot occupy the house during construction, you can finance up to six months of interest payments into the construction budget.

So, find yourself a lender that offers FHA loans and ask about the Streamline K. I think you'll be glad you did.