The full explanation
Part of the money pays the seller or the old mortgage, and the rest goes into an escrow account and is released when the work is completed. There are two types: Standard, for major or structural repairs, and Limited, for smaller, non-structural work. Eligible properties include one- to four-unit homes, townhomes and certain condominium units, among others.
An example
Ana finds a home that needs a new roof and kitchen. With a 203(k) loan, the money for the purchase and for the work goes into one mortgage, and the money for the work comes out of an escrow account when the job is completed.
You will see it in…
- The list of FHA-approved 203(k) lenders
- HUD's fact sheets about the 203(k) program
- Your Loan Estimate and Closing Disclosure
