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What is a 203(k) loan?

Section 203(k) is a portion of federal law that outlines how the Federal Housing Administration (FHA) will insure loans that meet certain conditions. These loans, often called 203(k) loans, allow a buyer to borrow the cost of purchasing a rehabilitating a home that needs repairs or modernization. Instead of having to take out separate loans for purchasing and repairing the property, Section 203(k) “offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property.”

How do I qualify for a 203(k) loan?

  • You must use an FHA-approved lender – because of the additional complexities inherent to these kinds of loans, the FHA approves lenders that have met their requirements and will only insure loans submitted by these lenders.
  • You must have a plan – only certain repairs and improvements will qualify, so your plans will need to be submitted to an FHA-approved lender for evaluation before the lender will issue this kind of loan.
  • You must have a budget – “The cost of the rehabilitation must be at least $5,000, but the total value of the property must still fall within the FHA mortgage limit for the area. The value of the property is determined by either (1) the value of the property before rehabilitation plus the cost of rehabilitation, or (2) 110 percent of the appraised value of the property after rehabilitation, whichever is less.” Not only will you need to submit a budget for repairs that falls between $5,000 and 10% of the purchase price, but the post-repair cost must be less than FHA limits. The 2019 limits for Nevada are below:
CountyOne-FamilyTwo-FamilyThree-FamilyFour-Family
CARSON CITY$318,550$407,800$492,950$612,600
CHURCHILL$314,827$403,125$487,250$605,525
CLARK$322,000$412,200$498,250$619,250
DOUGLAS$423,200$541,750$654,850$813,850
ELKO$314,827$403,125$487,250$605,525
ESMERALDA$314,827$403,125$487,250$605,525
EUREKA$314,827$403,125$487,250$605,525
HUMBOLDT$314,827$403,125$487,250$605,525
LANDER$314,827$403,125$487,250$605,525
LINCOLN$314,827$403,125$487,250$605,525
LYON$314,827$403,125$487,250$605,525
MINERAL$314,827$403,125$487,250$605,525
NYE$314,827$403,125$487,250$605,525
PERSHING$314,827$403,125$487,250$605,525
STOREY$412,850$528,500$638,850$793,950
WASHOE$412,850$528,500$638,850$793,950
WHITE PINE$314,827$403,125$487,250$605,525

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