The Federal Housing Administration’s rehab loan product, the FHA 203(k) loan, was designed for individuals who want to rehabilitate or repair a damaged home so they can live in it as their primary residence. These loans are endorsed by the government to encourage lenders to offer what would otherwise be considered a risky loan product. Because of the risk and expense involved, rehab projects are normally handled by professional real estate investors who can buy properties with cash and therefore don’t need any bank to approve the property’s condition.
FHA 203k loans are offered by the Federal Housing Administration, a government agency. The federal government designed these loans to encourage lenders to fund seemingly risky home purchases. Goals of neighborhood revitalization and greater home ownership opportunities also drove the creation of this loan.