203k Rehab Loan

With all the short sales and foreclosures on the market, there are plenty of good deals on single family homes. In the past, a buyer would have to obtain a construction loan and would have to put as much as 30% down in order to obtain the loan. There is a new program available called the FHA 203k Rehab Loan. With this program, you can buy a fixer upper with only 3.5% down.

A little background on the FHA Rehab Loan.  The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), offers this loan program to allow for repair of single family properties. A single loan is used to pay for the purchase and repair of the home. Condominiums, town homes and single family homes qualify for this program. It must be your primary residence.

There are two types of 203k Rehab Loans, Standard and Streamline.

Streamline Rehab Loans are for homes in need of mostly cosmetic work. It eliminates most of the paperwork necessary for the full 203k. The total cost of repairs including cost overrun reserves cannot exceed $35,000. Items covered under the streamline program would be:

Roof, gutters, downspouts

Existing HVAC Systems

Plumbing and electrical systems


Window and door replacement



lighting fixtures,


basement waterproofing

Septic and /or well repair or replacement

Standard Rehab Loans are for homes in need of more substantial repair, homes in need of structural work, remodeling, additions, etc. Unlike the Streamline loan which cannot exceed $35,000, the Standard loan can run up to the finished appraised value of the property. Items covered under the Standard Rehab Loan would be:

Structural additions and alterations


Attaching new unit

Remodeled kitchen and bathrooms

Install or repair well or septic systems.

With both types of loans, contractor estimates are submitted to the lender for approval. All repairs must begin within 30 days of closing and be completed with 6 months.

Main Street Mortgage NMLS #26450