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Advantages of a HUD 203(k) Rehab Loan for First-time Home Buyers

HUD 203(k) rehab loan

In this month’s Advanced Home Inspection blog, we discuss the many advantages of a HUD 203(k) rehab loan. With high home prices and low inventories throughout the state, many first-time home buyers in New Hampshire are entering the housing market with the help of a HUD 203(k) rehab loan.

What is a HUD 203(k) Rehab Loan?

The HUD 203(k) rehab loan is a specialized renovation or construction loan that’s backed by the Federal Housing Administration. It is unique in that people can borrow money equal to the estimated appraised value of their home after the repair work is completed. No other rehab loan (or other type of loan) offers this.
“Through a 203(k), you can get into a home at a lower price than you could through any other loan program,” says David Cassavaugh, licensed home inspector and owner of AHINH, one of the only certified HUD 203(k) consultants in NH.

HUD 203(k) rehab loan

Advantages of a HUD 203(k) Rehab Loan:

1.) The loan amount is based on the home’s final appraisal value.

As discussed, a HUD 203(k) rehab loan is the only loan where the amount you can borrow for renovations and repairs is based on what the appraisal value will be after the work is done. This gives buyers upfront access to the money needed to complete the renovations and repairs.

2.) The loan is not limited to newly purchased homes.

Another advantage of the HUD 203(k) is that it allows you to borrow money to renovate an existing home. Here’s one example of this that we came across recently:

A couple bought a house in New Hampshire, site-unseen. When they moved in, they realized it was too small for them. The house was two years old, and they bought it for $220,000. Through their HUD 203(k) loan, they were able to finance $80,000 worth of work, adding a two car garage, a master suite, a bathroom, and a new heating and cooling system. When the work was finished, the home appraised for $320,000. They ended up with $20k of positive equity in the home!

3.) The loan may be applied to foreclosed properties.

A HUD 203(k) rehab loan may be used to borrow money for renovating foreclosed and shut-down properties. This makes the 203(k) uniquely suited for New Hampshire’s current housing market. With fewer homes available for sale, many new home prices are beyond the range of first-time buyers. A 203(k) gives new buyers additional options as they shop around for the perfect home.

Certified HUD 203(k) Rehab Loan Consultants in NH

At Advanced Home Inspection, we proudly offer consulting services for HUD 203(k) rehab loans and other types of rehab loans, including Fannie Mae’s HomePath program. Our experienced and certified professionals help homebuyers understand these rehab loans, and work closely with them throughout the entire process. Contact us today! We’re here to help.