Rehab a Colorado Home with an FHA 203k Loan
When a Colorado homebuyer wants to purchase a house in need of repairs or modernization, a FHA 203k loan is an excellent option for them. It allows the Colorado borrower to get just one Colorado mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property.
There are 2 types of FHA 203k loans:
The Streamline 203(k) Mortgage
The "Streamline"(K) Limited Repair Program permits homebuyers to finance an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.
The Full 203(k) Mortgage
The Full Section 203(k) program enables homebuyers and homeowners to finance the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home. A portion of the loan proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The cost of the rehabilitation must be at least $5,000 but can be as high as the maximum FHA mortgage loan limit for the area will allow for.
To be eligible, the property must be a Colorado 1 to 4 unit dwelling that has been completed for at least one year. Cooperative units are not eligible. Colorado homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided some of the existing foundation system remains in place. In addition to typical Colorado home rehabilitation projects, this program can be used to convert a 1 unit dwelling to a 2, 3, or 4 unit dwelling. An existing multi-unit Colorado dwelling could be decreased to a 1 to 4 family unit. FHA also permits Section 203(k) Colorado mortgages to be used for individual units in Colorado Condominium projects that have been approved by FHA.