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FHA Rehabilitation Loans

When purchasing HUD homes, repairs may be needed, since homes are sold in “As Is” condition. Many homebuyers shy away from purchasing HUD homes for this very reason, thinking that they cannot afford the repairs or that the property needs more work than they can take care of on their own. While wear and tear occurs more often with government foreclosures, FHA financing offers certain options to homeowners that need to complete repairs after settling on their home.

The FHA often allocates some financing for repairing HUD homes.

The FHA offers a couple helpful rehabilitation loans for buyers to consider. For the purchase of single-family properties to four-unit properties that require rehabilitation, two different FHA rehabilitation loans are available.

FHA 203(k) Repair Program

This program hands rehabilitation needs that cost a minimum amount of $5,000. The following types of work may be included in this program:

  • Structural damage repair
  • Repairs or improvements that may take longer than six months
  • New construction
  • Landscaping improvements
  • Repairs that require architectural exhibits or detailed drawings
  • Major remodeling or rehabilitation
  • Environmental mitigations, which may include abatement of lead based paint or the disturbance of painted surfaces in properties constructed before 1978

The Streamline (K)

This financing option became available in 2005 and is designed to help homeowners with basic rehabilitation and repairs that cost less than $35,000. Specifically for buyers of HUD homes, this loan works for HUD homes that need repairs of at least $5,000 but less than $35,000. Designed specifically for simple improvements and rehabilitation, this financing option should be used for repairs that do not require engineers, architects or consultants.  This program includes the following repairs:

  • Replacement, upgrade or repairs to electrical or plumbing systems
  • Replacement or repair to downspouts, gutters and roofs
  • Interior and exterior paintjobs
  • Minor remodeling projects, not including those that require structural repairs
  • Appliances, such as dishwashers, ranges, dryers, washers, microwaves and refrigerators
  • Weatherization to the home, such as insulation, storm doors, weather stripping and storm windows
  • Replacement or repair to flooring
  • Accessibility improvements for the disabled

Next: Other FHA loan options