The Home Buyer's Korner

Information presented should be used for educational purposes only.

February 16th, 2017

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FHA 203K and “As Is” & “After Repair” Value

An appraisal completed by an approved FHA 203k appraiser is needed to underwrite both the traditional and streamline FHA 203K Home Buy It – Fix It homeloan program. As with any appraisal order by the lender, its primary objective is to establish reasonable value of the property being appraised. The principals consider of the property’s current condition, local housing market conditions, and the bids that are provided by either vendors or general contractor. If you using a HUD certified consultant, a detailed work write-ups will be required, as well as any optional feasibility study perform you may have requested.

The loan amount is determined by either the appraised value or the lesser sale prices plus repair or renovation cost. The maximum loan amount can range anywhere from 96.5 percent of the total cost or appraised value, up to 110 percent of the “after improved” value X 96.5 percent, or less the allowable downpayment for a HUD REO property, not to exceed the county or parish maximum loan limits set by HUD.

Most home purchases that require a mortgage or deed of trust need only have  an “As Is” value, based on the market’s prevailing condition. The FHA 203K appraisal is different, in that it requires the calculation of the “After Repair” value.

Refinances are a little different and the FHA appraisal requirements are slightly different. As there is no purchase agreement involved, and the present value of the properties is determined by using either the outstanding loan amount or the “As Is” appraisal value. When both values are available, and the lesser is chosen for setting the loan amount.

Both the “As Is” and “After Repairs” values can be provided on a single appraisal. The proposed improvements and renovation work is considered when arriving at the “After Repairs” value. 


FHA 203K

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