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Rehabilitation Mortgage

A rehabilitation mortgage is a mortgage that covers the costs of repairing or improving a property. The Federal Housing Administration 203(k) Rehabilitation Mortgage allows the borrower to include the rehabilitation and home purchase expenses into one mortgage loan. The Section 203(k) is HUD's primary program for repairing and improving single family properties.

To be eligible for the 203(k) rehabilitation program, your property must be a one to four family residence that has been completed for at least one year, and must meet local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible. If the residence has been demolished, or will be demolished during the rehabilitation, are eligible as long as some part of the foundation is still in place.

Eligible improvements include painting, room additions, decks, and other improvements even if the property does not need any other work. Health, safety and energy efficient features must be addressed before general home improvements can be done. Luxury items and those that will not become a permanent part of the property are not eligible. To determine the maximum amount of the mortgage, there are two required appraisals: As-Is Value, and Value After Rehabilitation.