Rehab Loans If you are looking to buy a home that is a “handyman special”, there are loans available that can help you purchase the home and repair it, with minimal cost to you.  FHA 203k Program - There are two FHA 203k programs available. They are administered by the Department of Housing and Urban Development. They follow the basic FHA guidelines, with one exception. When you apply for the loan, you are required to put together a plan of what needs to be fixed/renovated. Most home improvements are also eligible.  An estimate of the costs is also required. The FHA appraiser will then give two values on the appraisal – one of the property “as is” and one of the property after the repairs/renovations are completed. HUD will then initially finance 96.5% of the purchase price/initial appraised value (whichever is less) and your closing will take place.  After the closing, HUD will give you 96.5% of the renovation costs. Your actual mortgage amount in the end will be the total of both disbursements. If the renovations are under $20,000, they have a streamline process with Lowes/Home Depot. This is called the 203k Streamline. If the repair costs are over $20,000, then a traditional 203K plan is used, and the home buyer must submit a HUD approved renovation plan, as well as several bids from contractors, and a review of the plan by an FHA field appraiser. The money is given in disbursements as the repairs are done. Just like with a traditional FHA loan, seller contributions can be given for the closing costs, and Government, as well as non profit grants can be used for the down payment. Gifts from family members are also acceptable. There are no income restrictions, and credit guidelines follow traditional FHA financing guidelines.  State Bond Rehab - Most states have also has a rehab program for eligible first time homebuyers. It works very similar to the 203K plan. There are not a lot of lenders that participate in this program. Check the State’s web site to see if your State has a program that fits your needs. The rate is usually better than an FHA 203k.