203K Loans - how much deposit is required?

[Nicole Camarao]

Hello, I am interested in a 203K Loan for rehabbing but not sure of the deposit required?

[Andrew Postell]

@Nicole Camarao yes, the downpayment for a FHA loan is 3.5% and while the same nubmer for a 203K loan (since it's an FHA product) it's just 3.5% based on the purchase price PLUS your repair costs..  You might be required to have some reserves but those can be built in to the loan most of the time with an FHA loan as well.  Here's some quick bullet points on the program itself:

Other Important Items to know about FHA Renovation Loans

A FHA option to roll renovation/repair work into the loan. Down payment is based on the total of the purchase price + renovation costs. Loan can go slightly over appraised value if the need were to arise.

1.“Streamline Option” – or “Limited Repair Program”

• Total financed rehabilitation costs cannot exceed $35,000
• Maximum Sub-Contracts is 3
• If more than 3 are needed then a General Contractor will be required
• Repairs are limited to cosmetic repair only. Structural repairs are not allowed, such as room additions, foundation repairs, etc. Pools are also not permitted with Streamline Option

2.Full Repair Option

• Minimum of $5,000 in improvements
• 203k Consultant is required
• FHA Approved Single Family "construction manager" who oversees and inspects the rehabilitation work from start to finish
• Nearly any type of repairs is allowed (luxury items are not). Pools are permitted.
• Maximum $75,000 in repairs or 50% of the after repair value, whichever is lower

Contractor Approval

• Contractor must be accepted prior to final approval and be responsible for the entire project. Multiple sub contractors with multiple separate contracts are not allowed..
• Repairs/Improvements must be completed by licensed contractor(s) as required by local/state municipalities
• Repairs cannot be completed by a related or interested party (i.e. relative, real estate agent, seller, broker, etc.)
• Borrower selects contractor

Contingency Reserves

• Minimum 10% is required. Can be financed.
• With “Full” version – 20% reserves if renovation is major – foundation, room additions

Draw Requests

• “Draws” are funds paid to the contractor after work is completed.
• For “Streamline” – pictures of completed work is permitted
• For “Full” – Consultant inspects work