Need some clarification on 203k loan

[Michael D.]

I see many houses for sale, that are stated as "Require 203k loan". I spoke with my mortgage broker and, I'm still not clear on the appraisal process. It seems to me that some of the numbers are based on the After Rehab Value, which is a bit concerning. I'm of course interested in using the 203k as a tool to house hack a property, but I just want to make sure that the bank isn't a step ahead by basing the home and loan off of what this property will be worth once its been rehabbed. Any input would be greatly appreciated!

[Bill Gulley]

Worry no more, a 203K or any purchase money-rehab loan by any lender is based on the after repair value, the plans and specifications, material and labor costs will be part of that appraisal as well as the current value prior to rehab. You will close, the rehab funds will be disbursed, usually in stages depending on scope of the project. Each disbursement will have audit requirements and verification that work has been accomplished, then there will be a final appraisal. Now you know, you don't have to worry about it any longer. :)