Home Rehab Loans (Section 203k)
Once you find the property that you wish to purchase (and conduct
a preliminary feasibility analysis with your real estate professional),
or if you are already living in the residence you plan to rehab,
you should find a HUD-approved
lender who will help you
understand the next steps and details of 203(k) rehab loans.
Because many borrowers need professional help in determining needed
repairs or improvements, your lender will assign a 203(k) consultant
to assist you in planning the work and developing cost estimates.
The consultant will perform the home inspection, identify needed
repairs or improvements, including health and safety problems,
and provide a work write-up and cost estimate to you.
can contact a HUD-approved
housing counseling agency for
more information about the rehab loan program.
This following describes a typical step-by-step application/mortgage
origination process for a transaction involving the purchase and
rehab of a home. It explains the role of HUD, the mortgage
lender, the contractor, the borrower, consultant, the plan reviewer,
appraiser and the inspector.
- Homebuyer Locates the Property
- Preliminary Feasibility Analysis
After the property is located, the homebuyer and their realtor
should make a marketability analysis prior to signing the sales
contract to determine:
- The extent of the rehab work required
- The rough cost estimate of the work
- The expected market value of the property after completion
of the work (the borrower does not want to spend money for
appraisals and repair plans and then discover that the value
of the property will be less than the purchase price or existing
indebtedness, plus the cost of improvement
- Sales Contract is Executed
A provision should be included in the sales contract that the
buyer has applied for Section 203(k) financing, and that the
contract is contingent upon loan approval and the buyer's acceptance
of additional required improvements as determined by HUD or
- Homebuyer Selects Mortgage Lender
- Homebuyer Prepares Work Write-up and Cost Estimate
A consultant can help the buyer prepare the exhibits to speed
up the loan process. If a plan reviewer is the consultant, step
7 can be skipped and the exhibits can go directly to the appraisal
- Lender Requests HUD Case Number
Upon acceptance of the architectural exhibits, the lender requests
the assignment of a HUD case number, the plan reviewer, appraiser,
and the inspector.
- Plan Reviewer Visits Property
The homebuyer and contractor (where applicable) meet with the
plan reviewer to ensure that the architectural exhibits are acceptable
and that all program requirements have been properly shown on the
- Appraiser Performs the Appraisal
- Lender Reviews the Application
The appraisal is reviewed to determine the maximum insurable mortgage
amount for the property.
- Issuance of Conditional Commitment / Statement of Appraised
This statement is issued by the lender and establishes the maximum
insurable mortgage amount for the property.
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
This website is intended to provide a basic understanding of this
information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
Any information received here should be confirmed with the appropriate
government agencies or with an attorney, particularly as it relates
to your individual circumstances. Your use of this website indicates
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