There are many types of FHA home loans, so it’s easy to get confused in what looks like an alphabet soup of loan options. We get questions about these loan options quite often, but here’s a variation on one we haven’t seen in a while: “We are looking to purchase a HUD house that needs a lot of work including sewer system, plumbing, ceilings repaired. Would an FHA 203(b) loan be available in addition to the traditional FHA loan? If the 203(b) is available, how does it work in terms of repayment?” The reader might be thinking of a type of FHA home loan/refinance loan option known as the 203(k), which is also called an FHA rehab loan in some circles. It provides money for the purchase and renovation of a home at the same time. The 203(b) loan mentioned in the question, on the other hand, is essentially the FHA standard single family home loan. The FHA/HUD official site has a section that explains the hows and whys of the the FHA 203(b) loan: “What is the purpose of this program? To provide mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.” Who is eligible for an FHA 203(b)? According to the FHA:

• The borrower must meet standard FHA credit qualifications.
• The borrower is eligible for approximately 96.5% financing. The borrower is able to finance the upfront mortgage insurance premium into the mortgage. The borrower will also be responsible for paying an annual premium.
• Eligible properties are one-to-four unit structures.