Winter Haven 203(k) Rehab Loans – The Basics: Part 1 | Florida Mortgage Broker

One of the very best opportunities today for Winter Haven, Florida home buyers is to take advantage of the excess of repossessed homes on the market. Notably, a giant problem with these potential deals is that folks who are losing their homes due to an inability to make payments typically lack the money for routine upkeep as well. A 203(k) Rehab Loan is one of the very best mortgage programs to use when purchasing foreclosed or bank owned properties. Let’s take a look at some of the basics.

Standard vs. 203(k) Rehab Loans – A Basic Overview

Most mortgage financing plans allow for funding on homes in good condition. That is, the lender will typically not allow the loan to close unless the condition and value of the property can adequately stand in as collateral for the loan itself. Where rehabilitation is involved, your Florida mortgage lender will require the improvements to be finished before a long-term mortgage is made.

The 203(k) mortgage program (also called the 203(k) Rehab Loan Program) was designed to address situations where you may want to purchase a Florida foreclosed home or bank owned home that is in less than perfect condition. In some cases, the home may be in absolutely uninhabitable condition. Using the 203(k) rehab loan, you can obtain home loan financing, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of this sort of property.

Appraised vs. After Repair Value (ARV)

Unlike traditional home loans, which are based on your chosen property’s present appraised value, your 203(k) loan will be calculated so that you receive funds to cover the rehabilitation. The actual mortgage amount is based on the projected value of the property with the work completed, taking into account how much the work will cost to contract out and complete.

To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible to be backed by the Department of Housing and Urban Development (HUD) as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan – which is a good thing, I’m sure you will agree.

Part 2 of this series will talk more about which property types are eligible for the 203(k) Rehab Loan program.

I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!

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