Frequently Asked Question: Is there a maximum amount you can borrow on the FHA 203k Rehab loan?
Q: If the maximum loan for FHA is $271,000, then can I buy a house for $171,000 and 'borrow' the additional $100,000 to rehab the house? (yes, I know you don't want to over-improve a house and price it out of the neighborhood.... lets just assume that the improvements are reasonable value-wise. I am inquiring about the details of the FHA 203k Rehab loan.)
A: In short, the answer is yes, there is a limit. The limit is the maximum FHA loan amount for the county in which the house is located. The house of course must appraise for the value after the renovations are completed, and you must be able to afford the mortgage taking into account your income and monthly debt obligations.
As you expect to make more than $35,000 in repairs / renovations / upgrades, you must go through the full FHA 203(k) Rehabilitation Loan program. That means you must hire an FHA 203(k) consultant to document the repairs to be done along with the estimate of costs of repairs. That list must be provided to the appraiser BEFORE the house is appraised. The appraiser will provide a "before" and "after" value of the house. The "before" appraisal is the appraiser's opinion of value before repairs are done. The "after" value is the appraiser's opinion of value after the repairs are completed.
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