The 203k Rehabilitation loan is a mortgage loan insured by the Federal Housing Administration, or FHA. With this loan you can make home improvements on a new house, make simple upgrades like a kitchen or bath for a home you already own, or completely reconstruct a home that is presently unlivable. A 203k Rehabilitation loan can even be used to tear down an existing structure and rebuild using some portion of the existing foundation.
You can borrow up to 96.5% of the appraised value – based on the value when the improvements or repairs are completed. The home must be owner-occupied and a primary residence, so no investors or vacation homes.
HomeStyle Renovation Loan
The HomeStyle Renovation loan option offers a low down payment option for qualified borrowers, as well as the chance for investors or buyers looking for a second home to buy and remodel. The HomeStyle Renovation loan can be used in a new purchase transaction or for a limited cash-out refinance in which you receive funds to cover the cost of repairs, remodel, renovation, or energy efficiency improvements on a property.
There are no required improvements or restrictions on the types of repairs allowed or a minimum dollar amount for the repairs. However, repair and improvements must be permanently affixed to the real property and must add value to the property.