How to Get a Bank to Finance A Distressed Property


The FHA 203(k) loan allows a borrower to include the repair/improvement costs in the loan amount on either a purchase or refinance with one closing. The funds for repair/improvement are held in escrow, to be released when the work is completed. The mortgage amount is based on the projected value of the completed project. Encouragement from FHA makes this loan easier AND faster to close than ever before.



No minimum requirement for improvements is required. Improvements may also include a detached garage, a new detached garage, or the addition of an attached unit (if allowed by local zoning ordinances).


The mortgage must include one or more of the items listed below:

* Structural repairs and alterations.

Includes such items as additions to the structure, repairing any and all structural damage.

* Improvements in the functionality or modernization.

Includes such items as remodeled kitchens and bathrooms.

* Changes for aesthetic appeal, and the elimination of obsolescence.

New exterior siding and new doors.

* Repair or replacement of plumbing, heating, air conditioning or electrical system.

Installation of new plumbing fixtures are acceptable, including interior whirlpool bathtubs.

* Installation of Well and/or Septic System

Must be installed or repaired prior to beginning any other repairs to the property. Properties less than one acre in size can be limited on this item.

* Replacement of flooring, carpeting or tile

* Energy conservation improvement

New double pane windows and doors, storm windows, insulation, solar domestic hot water systems.

* Major landscape work and site improvement

Patios and terraces that improve the value of the property equal to the cost, or that are needed to preserve the property from erosion. Tree removal is also acceptable it the tree presents a hazard to the occupants.

* Improvements for easier accessibility to the handicapped



* New cooking ranges, refrigerators and other stand alone appliances,

* Painting and other cosmetic repairs.

* Fencing, new walks and driveways, and general landscape work (trees., shrubs or seeding).

* Repair of a swimming pool, up to $1,500



* Items that will not become a permanent part of the property are not eligible.

* Luxury items are not eligible. These include, but are not limited to: New swimming pools, exterior hot tubs, saunas, spas, tennis courts, and barbecue pits


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