The Truth About FHA 203K Rehab loans. The basics of what is needed to make it work.

In today's market there are great opportunities for buying a home. Sometimes the best buys are in bad shape. This prevents most buyers from being able to purchase these as-is homes that are in need of repair. The FHA 203 K rehab loan program is designed to allow a home buyer to purchase a home and finance the repairs. This program is not as easy to use as many web sites make it seem. Here are some basic things you should know when considering an FHA 203 K loan:

*Debt ratios on 203K are restrictive to 31/41 (no exceptions) .

*Borrower chooses 2 General Contractors to submit bids. GC must be licensed, insured and bonded. (no exceptions)

*No self work is permitted, except for interior painting and purchase of appliances.

*HUD Consultant meets with borrower at property to do write up of all repairs and then forwards to appraiser.

*Contingency Reserve requirements: utilities 10%, self help 20%

*HUD consulting fees -

*Rehab up to $7,500 - $400.00 fee

$14,999 - $500 fee

$30,000 - $600 fee

$50,000 - $700 fee

Over $50,000 --$800

*After loan is approved, any money left over after work is complete is used to reduce principal balance. Loan does not re-amortize.

*Contractor must complete 1st phase of work before any money is released from our escrow release department and ALL minimum property standards MUST be addressed per HUD guidelines before customer can incorporate "wish-list" or further improvements. Again, this is all inclusive itemized list of repairs is drawn up by HUD consultant. Normal draw schedule is 2-4 weeks after closing with periodic inspections to ensure contractor is performing work properly.

*Down payment of 3.5% based on purchased price.

*Source of funds must be verified.

*Make sure you use a mortgage representative who knows what they are doing. This information is provided courtesy of JUAN JORDAN COUNTRYWIDE HOME LOAN CONSULTANT 609-677-7614 DIRECT or 732-423-6494.

If you have any questions about FHA 203 K loan programs or questions about the best way to buy homes in today's market please call me at 609-338-3773.

Best wishes,

Matt