Are you in the market for a new home, you qualify for an FHA home loan, but are having trouble finding one that falls within the appraisal guidelines? There is a little known loan guarantee from HUD that could pay up $5000-$35,000 or up to 110% of the home's value if you and your home qualify.  The FHA 203(K) Rehab Loan program could be for you!

Usually when you think of a loan for rehab you think of finding a private lender with high interest rates and fees, and a short loan duration. The 203(K) Loan program allows you to add the funds right to a mortgage or to a refinance and pay it all as one payment.  The mortgage or refinance goes right to the lender for the home and the money for rehabilitation goes into an escrow account and gets paid out to vendors as needed.

To be eligible, the subject property has to be a residential dwelling. The property must be completed for at least a year with a up to 4 living units that are all attached and not a cooperative. In addition to financing individuals and families, the 203(K) rehab program also provides financing to organizations engaged in the renovation of properties to revitalize neighborhoods.

Residential properties that need minor repairs (<$35,000) should use the streamline 203k program. This mini-version of the standard 203k program has limited requirements when it comes to loan approval. A 203k consultant is not required. For structural or more extensive repairs the Standard 203(K) program should be used. This requires a higher credit score but allows up to 110% of the property value to be borrowed.

You can completely raze a property as long as some of the existing foundation is left intact. HUD homes that have been foreclosed on that are for sale on their website will also tell you if they are 203(K) eligible. You can visit their website for a list of homes in your area at

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