FHA Escrow Holdback and 203k loans

FHA escrow hold-backs help address appraiser required repairs in a more flexible way. The FHA escrow hold-back is used along with an FHA Loan.

What is an FHA Escrow Hold-back?

The FHA escrow hold-back program helps FHA borrowers finance repair costs as well as fix required repairs after closing. Only FHA appraiser or underwriter required repairs are escrow hold-back eligible.

In short, lenders set money aside and into an escrow account. After closing, the FHA lender uses those same fund and pays contractors for completing the repairs. The FHA buyer and/or the seller is allowed to fund the escrow hold-back.

How an FHA Escrow Hold-back Helps

Escrow hold-backs help FHA buyers close on a home purchase prior to the completion of required repairs. Typically, FHA requires the completion of all required repairs before closing.

However, FHA accepts an escrow hold-back for required repairs. Therefore, required repairs can be completed after the FHA loan closes instead of before.

  • Broken A/C unit
  • Cracked window
  • Exposed wiring

The FHA escrow hold-back allows FHA home-buyers to close on their home first and then complete repairs after closing on their Arizona FHA loan.

FAQ’s: FHA Escrow Hold-back

What amount can be financed by an FHA Escrow hold-back?

FHA escrow hold-backs allow for up to $5,000 in repairs. See FHA 203k for larger projects.

How do I handle appraiser required repairs on my FHA appraisal?

An FHA escrow hold-back OR an FHA 203k loan are both great options when dealing with FHA required repairs.

Do FHA escrow hold-backs apply to purchases and refinances?

Yes, you can use an FHA escrow hold-back for either a home purchase or refinance.

When using an escrow hold-back, when do the repairs take place?

All repairs financed by the FHA escrow hold-back take place AFTER your new loan closes.

How fast do repairs need to be completed after closing?

FHA escrow hold-back allows for 30 days. In other words, the repairs funded by the hold-back need to be completed withing 30 days of your loan closing.

FHA Escrow Hold-back Eligible Repairs

FHA allows escrow hold-backs for required repairs. A required repairs one an underwriter or appraiser states as violating FHA property rules. Both an FHA appraiser and the lender’s underwriter may designate required repairs on a transaction.  

Borrower desired repairs renovations, upgrades do not qualify (unless they are also required by an appraiser or underwriter). In other words, an escrow-hold-back cannot be used for financing a new swimming pool or remodeled a bathroom.

Typical FHA Required Repairs

FHA appraiser’s can list a number of escrow hold-back eligible repairs. In fact, posting them all here is not possible. However, certain repairs are more common than others. For example:

  • Exposed wires
  • Non functioning air conditioner unit(s)
  • Broken glass/window

In general, the FHA escrow hold-back option is flexible. FHA buyers can use this as an additional tool to deal with required repairs. Rather than be forced to have required repairs fixed before closing, FHA buyers can use an escrow hold-back to have repairs fixed after closing. The best part is this all meets FHA’s property and underwriting rules.

Additional Renovation Loan Products

While an FHA escrow hold-back is useful, it also has limits. Thankfully, several other Renovation loans exist. We offer other loan products for renovations, upgrades and repairs to be financed and completed after closing for Conventional, FHA, VA, JUMBO and USDA loans. Many of these loans are more expansive than the FHA escrow hold-back. Many also allow for optional upgrades and larger cost repair items.