Greetings,
Your scenario is Kosher. If you are borrowing money to renovate the propety then those funds have to be accounted for and you have to pay them back.

If you are borrowing money on a house that does NOT need any repairs then you are getting a raw deal.

Do you have the inspection results? Have you had a contractor provide an estimate for the work to be done? Has your lender ever executed a 203K loan that closed? (I have banks that refuse to entertain contracts that indicate financing is a 203K loan because lenders don't know how to get them funded.)

Good Luck,

In the case of a 203k Mortgage, the total price of the sale becomes the agreed upon price of the property plus the cost of the improvements that have been agreed upon from the bank based upon the inpspections.

So, if you offered $200,000 for a house and it needed $25,000 worth of repair as agreed upon by the mortgage company (based on a RI registered contractor's estimate), then the total amount you are borrowing is $225,000 (or the final sales price). I hope this helps to clear things up for you. Joe.

You should speak to your buyer's agent about your questions.