Let's say you look at a home which is a foreclosure. You love the location, the floor plan, the yard but the home needs painting, carpet, new kitchen counters, and replacement of some interior doors that have been damaged. You say to yourself that you would love the home but just don't have the money to fix it up. The 203K loan allows you add the repair cost to the purchase price, having the total in one loan.
If you plan to occupy the home you can obtain this loan with a minimum of 3.5% down and a credit score of 640 or higher and you do not have to be a first time home buyer. If you are an investor you can also use this loan. The down payment requirement is higher but you could purchase a home and make repairs and have it ready to rent quickly. And the total cost is all in one loan.
I have clients who are purchasing a foreclosure. It is on over one acre of land in the area the wanted. But many of the mechanicals were missing or damaged; copper pipes missing, no hot water heater, etc. They bought the home for a great price and are having all the costs of repairs added to the loan. They are getting a great deal and don't have to come up with the money for repairs immediately.
Make sure you work with a lender who is experienced with this type of loan. He/She can guide you through the process. It will be well worth the effort.
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