Find information on FHA 203(k) loan guidelines and requirements on the U.S. Department of Housing and Urban Development and the Renovation Lending Group websites. This loan helps families renovate their primary residences and helps organizations to revitalize neighborhoods, reports the Renovation Lending Group.
A 203(k) rehab mortgage allows a person to finance renovations of his current home or to fund the cost of both the purchase and renovation or rehabilitation of a home with a single loan. A 203(k) has a longer term repayment and lower interest rate than a traditional loan, explains HUD. The loan can be used for everything from minor renovations, such as modernizing the kitchen, to major repairs such as structural alterations and reconstruction. Homes financed with a 203(k) loan must meet certain energy efficiency and structural requirements.
The loan must be used to purchase and/or renovate the primary residence of the loan applicant. However, a 203(k) can also be used by organizations to purchase and renovate homes in an attempt to revitalize neighborhoods, according to the Renovation Lending Group. There are two types of 203(k) loan programs: the standard program and the streamlined program. The standard program is for major renovations or repairs of a home, and a minimum of $5000 must be borrowed from an approved FHA lender. The streamlined program is for minor repairs and cosmetic improvements.