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Fix Up Your Home When You Buy or Refinance

Fix Up Your Home When You Buy or Refinance

Fix Up Your Home When You Buy or Refinance

Fred Miller, Realtor, ,  Cell 281/924-2531 

Qualified homebuyers can include the costs of improvements in their mortgage with a 203(k) FHA loan.  This program is used to purchase and rehabilitate a home or refinance an existing mortgage to rehabilitate the property.  The borrower must occupy the property, that is, it must be your principal home and not an investment property.  Most items qualify that improve the principal components of the house, such as foundations, roofs, siding, plumbing, electrical, air conditioning, flooring, remodeling kitchens, bathrooms, painting, energy efficiency. Luxury items such as installation of a swimming pool, hot tub or barbeque pit are not eligible.

Down Payment is 3.5% but money can come from multiple sources such as gift, collateralized or secured loan, bond money, retirement or seller contribution.  The loan is made by a lender that is insured by HUD though FHA.  You must have an FHA approved lender.  Some lenders do not make FHA 203(k) loans for various reasons.  When times got harder more lenders have started mentioning that they do the 203(k). Working with a lender who is not experienced is something you should avoid.  Make sure they have done some of these recently.  The mortgage amount is based on the current value of the home and the projected value after the improvements are made.  Of course the borrower must be financially able to to make the payments on the loan like any other loan.  An FHA approved appraiser must provide the “After-Improved” Value of the home.  Obviously the home plus the improvements can not exceed a reasonable value for the property.

A detailed proposal is made showing the scope of the work to be done, including a detailed cost estimate for each repair or improvement.  Getting bids for the work and the appraisal can take some time.   The work must begin within 30 days of execution of the Agreement.  The work must not exceed six months. The improvements are monitored by an inspector.  The repair escrow is held by the lender until the work is completed for each project.  The loans take longer to close because of the complexity.

If you have more patience than money, this might be a good approach for you whether you are buying or refinancing.  Most conventional loans do include money for repairs.  If you own a home that needs repairs or want to purchase a home that needs the repairs, but you don”t have the money for the down payment plus the repairs, this is a way to go. 


Fred Miller, Realtor,,  Cell 281/924-2531