FHA 203k Eligibility May Soon Expand To Real Estate Investors

Karen Lawson
The Mortgage Reports editor

FHA 203k for investors coming soon?FHA 203k Loans For Real Estate Investors

16 years ago, the FHA changed its “construction loan” program, making it available for owner-occupied properties only. Real estate investors and owners of vacation homes were locked out. 

Today, there’s talk of restoring 203k access. HUD says it intends to re-open 203k loans to investors sometime soon, although no specific date has been announced.

Click here for today's mortgage rates (Dec 8th, 2019).

The 203k : An FHA Construction Loan

The FHA 203k mortgage is similar to a bank construction loan. Homeowners submit construction plans to the lender and the lender makes a loan based on the expected value of the home post-repair.

The FHA 203k has minimum eligibility standards :

  • Homes must have fewer than 4 units and must be at least 12 months old
  • Planned repairs must meet local zoning and building codes
  • If new living units are planned, they must be attached to the original structure

In addition, standard FHA underwriting requirements apply including minimum FICO scores for applicants and the meeting of minimum debt-to-income ratios.

FHA 203k loans can be used for foreclosures and fixer-uppers at the time of purchase, and may also be used for homes which you already own. 203k loans can be a less expensive way to finance home construction.

Click here for today's mortgage rates (Dec 8th, 2019).

203k For Investors Can Help Neighborhoods, Communities

When HUD opens the FHA 203k mortgage program to real estate investors, it will help buyers who choose to renovate and resell. Currently, these buyers pay cash for homes and finance construction via personal funds. With the ability to leverage a bank’s money, investors will likely buy more foreclosures and renovate more homes.

Access to the FHA 203k program helps investors, but it also helps communities hard-hit by foreclosures and the economy. Real estate investors have the experience and ability to buy and repair homes at a rapid pace as compared to individual buyers.

HUD 203(k): No Official Decison Yet

The HUD 203k mortgage program facilitates the purchase, repair and occupancy of vacant homes. And, although there’s no timetable for making 203k available to investors, the real estate community eagerly awaits the change.

If you’re a home buyer or home owner looking to use the 203k for construction, get started with a rate quote. As mortgage rates have dropped overall, 203k mortgage rates have, too. It’s an inexpensive time to finance a project.

Click here for today's mortgage rates (Dec 8th, 2019).