An FHA 203(k) loan allows borrowers to finance both the purchase and rehabilitation of a property. A buyer wants to purchase a fixer-upper for $150,000 and estimates $50,000 in renovation costs. How does the FHA 203(k) loan work in this scenario?
Correct Answer
D) The buyer finances the purchase price plus renovation costs in a single FHA-insured mortgage, with funds held in escrow for the improvements
An FHA 203(k) loan combines the purchase price and renovation costs into a single mortgage. The renovation funds are held in escrow and disbursed as work is completed, ensuring the improvements are made.
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