Synopsis: Builder Dave Ames discusses the 203(K) section of the National Housing Act (amended in 1989) which facilitates the restoration of existing houses. It is designed to enable home buyers to secure FHA financing for a home that does not currently meet FHA standards. The home buyer can arrange to have the house brought up to FHA standards, then close on a loan that includes the rehabilitation cost in the purchase price of the home. The program still exists today through HUD.

As a builder specializing in remodeling and custom renovations, one of the nagging problems I’ve dealt with over the years relates to financing. All to often, the purchase of a house in need of repairs is a catch-22 situation: The bank won’t lend money to buy the house until the repairs have been completed, and the repairs can’t be done until the house has been purchased. This bureaucratic quagmire has swallowed or delayed countless building projects over the years. Fortunately, there is now a route around the quicksand in the form of a relatively new version of an old lending program. The updated program is uniquely suited to today’s changing market conditions and provides new opportunities for both contractors and homeowners.

In 1989, the Federal Housing Administration (FHA) amended section 203(k) of the National Housing Act to facilitate the restoration of existing houses. The 203(k) program is specifically designed to enable potential home buyers to secure FHA financing for a home that does not currently meet FHA standards. The home buyer can arrange to have the house brought up to FHA standards, then close on a loan that includes the rehabilitation cost in the purchase price of the home.

The 203(k) program is positive in several ways. First, it allows first-time buyers who otherwise might not be able to afford a home the opportunity to get into a fixer upper. It also creates a potentially vast market for professional remodelers. Because a remodel takes less materials than a new house, the program should help us to conserve our dwindling timber resources. Finally, this is the only FHA financing program currently available to builders and investors wishing to purchase rental property.

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