What is the HUD 203(k) Loan?

The HUD 203(k) Loan is an FHA program designed for the purchase of “fixer-upper” properties. This unique loan funds the purchase of the home AND funds the necessary repair and remodeling projects.

Who is the HUD 203(k) Loan For?

Generally, the HUD 203(k) loan is used by potential homeowners who don’t have a large down payment and are trying to purchase a property that is in disrepair.

How Does the HUD 203(k) Loan Work?

Once a borrower finds a property, he submits an application for a HUD 203(k) loan along with a list of the necessary repair projects and an estimate of their costs. An independent appraisal is conducted to determine how much the property will be worth after the renovations are completed.

If the borrower’s HUD 203(k) application is accepted, the property is purchased and the additional funds are placed in an escrow account for use as the repairs are completed.

If the property will not be occupied during repairs, the borrower can choose to have up to six months of mortgage payments put in to the cost of the remodeling. The borrower must complete the improvements by a set date.

Learn More

To learn more about FHA programs see: FHA Loan Basics.