Have you been thinking about adding a deck to your home or installing new windows? Do you have big dreams for that fixer-upper you’re considering purchasing?
If so, the Department of Housing and Urban Development (HUD) has a program that would allow you to get these home improvements done.
The Section 203(k) program is HUD’s primary program for the rehabilitation and repair of single-family properties. This program is sometimes referred to as a “renovation loan” or “rehabilitation loan.”
Section 203 (k) loans are available through FHA-approved lenders, meaning that this is not available through conventional financing. The program was created to promote and facilitate the restoration and preservation of the nation’s existing housing stock, as well as to help revitalize lower income communities.
This type of loan is different from other models of financing, which typically involve supplying mortgages for properties that are up to code and provide adequate loan security. When rehabilitation is involved, a lender usually requires the improvements to be finished before a long-term mortgage is made.
Renovation loans allow homebuyers to purchase a house in need of repair or modernization, finance the reconstruction of the home, and obtain a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Borrowers get one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property.
The types of improvements that borrowers may make using Section 203(k) financing include: