What is a 203k loan?

"Due to the current structure of this home, it is deemed unsuitable for financing. Only cash offers or rehab loans accepted."

You may have heard this statement before. Usually after touring a home that was in really bad shape. Examples of major cases are foreclosures that were trashed, or the previous owners stopped right in the middle of their renovation.

If you're looking for a home in this market full of foreclosures and REOs, you might have noticed a lot of unsightly interiors. Sure, the outside may look nice, and the neighborhood may even be a highly desirable one. What happens when you found the location you want, but the inside is so bent out of shape that the bank deems it unsuitable for financing?

A 203k loan, or rehab loan, may save the day. These loans are structured in a way to help a buyer finance a home that is not "finished" or built up to code. It is basically an FHA loan where the repairs are started after the close of escrow. Escrow usually lasts 60+ days, giving buyers an extra few weeks to meet with construction companies for repair quotes to bring the home up to minimum FHA building standards. Once a buyer submits the best quote to their lender, that amount will be added to the loan after the close of escrow, and the rehab can begin.

If this seems like something you are interested in, find a good lender who specializes in 203k loans, and see if you can qualify for one.