FHA 203 (k) Rehabilitation Mortgages
Support rehabilitation in the communities you serve
Housing rehabilitation is essential in revitalizing neighborhoods and expanding homeownership opportunities. Freddie Mac is helping you support these efforts in the communities you serve by purchasing FHA 203(k) Rehabilitation Mortgages that finance:
- the purchase and rehabilitation of a home in a single transaction or
- improvements to a property a homebuyer is purchasing
FHA bases the mortgage amount on the "as-is" value of the property, plus the costs of rehabilitation as detailed in the 203(k) guidelines. The maximum allowable mortgage is eligible for endorsement by FHA once the mortgage proceeds are disbursed. At that time, FHA establishes the rehabilitation escrow account, and before the property rehabilitation is complete, the mortgage is fully guaranteed. On a negotiated basis, Freddie Mac purchases fixed-rate, FHA 203(k) mortgages once FHA has endorsed them. You will need to obtain Freddie Mac approval before selling these mortgages to us.
Product Features
| Feature | Requirements |
Property Type |
- 1- to 4-unit owner-occupied primary residences, including single-family dwellings, condominiums, and planned unit developments (PUDs)
- Manufactured homes in accordance with HUD guidelines
- Rehabilitation may include converting a 1-unit property to a 2- to 4-unit property or converting a 4-unit property to 3 units or less
- Value of the property is the lesser of:
- The "as-is" appraised value of the property, plus the HUD-approved cost of rehabilitation.
- 110% of the "as-completed" appraised value of the property.
|
Eligible Mortgage Products |
- 15- and 30-year fixed-rate mortgages
- Assumable
- Rehabilitation requirements include:
- Minimum of $5,000 of repairs, remodeling and rehabilitation to property
- Safety code violations must be corrected and energy conservation standards met
- No luxury improvements as define by HUD
|
| Borrower Eligibility |
- Determined by HUD eligibility requirements
|
Transaction Type |
- Purchase and rehabilitation transactions
- Refinance and rehabilitation transactions
| Maximum LTV Ratios | - Each FHA 203(k) Rehabilitation Mortgage must comply with the Single-Family Seller/Servicer Guide (Guide) LTV/TLTV ratio requirements, unless the applicable FHA requirements are more restrictive
| Eligibility/Underwriting |
- Loan Prospector or manually underwritten
- HUD underwriting and guarantee required
- Standard Freddie Mac guidelines apply to components not covered by HUD restrictions
- Seller/Servicer must be approved as a HUD 203(k) Direct Endorsement lender with at least one year of active participation with 203(k) mortgages – originating at least 20 mortgages or $1 million in total unpaid principal balance
- Mortgages must be serviced by the originating Seller/Servicer during the property rehabilitation
- Property Inspection by HUD-approved inspectors
- Final inspection after rehabilitation
- Rehabilitation must be completed within 180 days of closing
| Execution Options |
- Fixed-rate Cash, servicing-retained
- Fixed-rate Guarantor
- MultiLender Swap
| Delivery Fees |
- Postsettlement delivery fees may apply based on the individual characteristics of the mortgage. See Guide Exhibit 19
[PDF 161K]
for details on applicable fees.
| Special Delivery Requirements |
- Recourse is required
- Pooling
- Loans may be commingled with your standard FHA 203(b) and VA mortgages, but may not be commingled with other conventional loans
- 203(k) mortgages can be pooled together
| Guidelines |
- See Guide Chapter 35.5 for general purchase requirements for FHA/VA mortgages
- Refer to the HUD 203(k) Handbook for specific FHA 203(k) Rehabilitation Mortgage requirements
|
Download a FHA 203(k) Rehabilitation Mortgages
[PDF 183K]
fact sheet for more details.
Lender Benefits
A FHA 203(k) Rehabilitation Mortgage allows you to:
- Expand your line of business by offering borrowers an affordable housing product that increases profitability
- Revitalize neighborhoods and expand homeownership opportunities
Benefits for Your Borrowers
FHA 203(k) Rehabilitation Mortgages help your eligible borrowers:
- Reduce financing costs for borrowers with one mortgage by having only one set of closing costs that covers all eligible expenses
- Finance all types of home rehabilitations
Get More Information
The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.
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