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Unlike a conventional loan, a hard money loan, on a case by case basis, lends up to 70% of the AFTER REPAIR VALUE, not the purchase price.

203(k) loans also base LTV on AFTER REPAIR VALUE. From the HUD website http://portal.hud.gov/hudportal/HUD?src=/program_offices/hou... (emphasis added)

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. (comment - i.e. hard money loans) The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.

AJ
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