203 K Loans
One unique program sponsored by F.H.A. is their renovation loan. If you find a home that needs work you can borrow funds to not only purchase the home but provide money for repairs. The loan approval process is somewhat similar to the normal F.H.A. loan process. The bank checks your credit, cash and employment. However, the bank sends out an appraiser who values the home, at the value with the improvements added. The bank will then lend you funds based on its future appraised value, with repairs factored in.
After settlement the bank continues to work with you. After some repairs are completed you contact the bank and an inspector looks over the repairs completed. If the repairs are done in accordance with the improvement plan, and according to code, then the funds are released to you. At the end of the repair work all funds are then released to you.
There are a few draw backs with the program. First your work is being inspected and reviewed by the bank and must be done according to building codes. Second, the interest rate is one percentage point higher then a standard F.H.A. loan. Usually the closing costs are higher as well.
Despite the drawbacks it is a program that some home improvement contractors love. They can work on their own home and be reimbursed for expenses, at the fair market value of the repairs. Even regular home owners can benefit. Any work done by the home owner is reimbursed at its fair market value. If you repaint the home yourself and the contractor price is $1,500 you get the full $1,500 even if you only spend $125 for paint.
For more information on this program contact: Stephen W. Leslie at