Here is the FHA explanation of the 203(k) Loan:
"Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.

Purpose: Section 203(k) fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment. However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security. For less extensive repairs/improvements, see Streamlined 203(k)."

Okay, so what does this mean to you?

It means you can purchase a home a great price, borrow funds that will purchase the property AND the funds to fix it up! Change the carpet, the roof, the kitchen, the bath...etc. No, you can't add a pool or a fancy outdoor BBQ. BUT you can find a home below your budget, remodel it and have the home you were dreaming of! It is a great program! It helps sellers who don't have the funds to fix a home prior to selling it, it helps buyers open up possibilities for purchasing their new home!

How does it work? First you contact your FHA lender. (I will give you some names of local lenders who are FHA certified, just email me!) Go through the qualification process. Find out what your buying power is.

Then we go to work finding you choices, homes to look at. Once we find the one you want to work with, we notify your lender. While a "planner" comes and takes a look at the property. We plan your remodel, get a General Contractor and bids together. We submit our paperwork, await lender approval, close on the property, and get the Contractor to work! The funds are dispursed to the Contractor as the work is completed. All work must begin 30 days from close and must be finished within 6 months! The typical time frame from the time you find the property to closing is 45 to 60 days.