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FHA 203 (k) Renovation Loans

FHA 203(k) renovation loans - purchase and renovate all in one loan                                                                                                                     

Subject to some value restrictions, the FHA 203(k) loan program can be an excellent choice for moderate to extensive repair. HUD and the Federal Housing Administration are focused on maintaining America's housing stock and have extensively improved the program. The minimum renovation amount isonly $5,000 and can we are able to lend up to 110% of the "as completed" value. This program can be an excellent choice if you do not have significant equity in your home and is almost always a better choice than consumer or credit card financing.

The FHA 203(k) allows homeowners and homebuyers an opportunity to purchase or refinance existing homes and finance 110% of the costs needed to improve the home. The 203(k) is ideal for "fixer-uppers" or "handyman specials". The 203(k) - a pioneer in this type of financing transaction - is actually over 30 years old, and until 1994 was known as a horrendous web of paperwork and long delays. However, in 1994 HUD recognized the need for assisting the aging housing stock and restructured the 203(k) program. Today, the 203(k) is one of the fastest growing mortgage programs in the country. However, there are some limits to FHA financing. I also have extensive information available on Conventional Renovation Loans.

With the FHA 203k you can:

  • Borrow up to 110% of the "after-completed" value
  • Include all repairs in the mortgage (Minimum $5,000)
  • Eliminate health hazards (lead paint)
  • Make structural repairs and alterations (including additions)
  • Remodel kitchens, bathrooms, etc.
  • Replace siding, roof, gutters, downspouts, etc.
  • Update plumbing, heating, electrical systems
  • Install or repair the well and/or septic systems
  • Replace flooring, carpeting or tile
  • Make energy conservation Improvements: Double pane windows and doors, insulation, caulking
  • Add decks, patios, fencing

203(k) Guidelines:

The 203(k) loan can be used on many different types of properties (owner occupied only):

  • One to four unit dwellings 
  • Multi-unit dwellings being converted down to one to four units 
  • Non-residential building being converted to residential 
  • Single family dwelling being converted to 2-4 units 
  • Mixed use properties: Commercial properties with residential units attached. 
  • Buildings that have been raised or demolished. May be rebuilt from the foundation.  
  • Refinance a property purchased with cash within the past 6 months and receive cash back.

The 203(k) can be used for any repairs or remodeling after a minimum of $5,000 of required and eligible repairs have been done:

Required repairs (Must be done):

  • Thermal envelope: Caulking, weather-stripping, insulation, attic ventilation.
  • Smoke detectors
  • Wood boring insect and moisture damage
  • Well/septic repair and certification
  • Elimination of health and safety hazards.

Eligible repairs:

  • Modernization and functional changes
  • Structural alterations and additions including changes for aesthetic appeal and elimination of obsolescence (such as siding, adding a porch or second story)
  • Addition of an attached unit(s) and/or attached/detached garage.
  • Recondition/replacement of plumbing, heating, AC and electrical systems
  • Roofing, gutters, downspouts
  • Flooring, tile and carpeting, if damaged
  • Energy conservation improvements
  • Major landscape and site improvements (such as correction of grading and drainage, tree removal, patios/decks, minor shrubbery and landscaping. Fencing is not included.)
  • Handicapped accessibility
  • Painting, if peeling
  • Rehab or improvements to a detached building or garage.
  • Repair existing walks and driveways if they present a hazard.

Acceptable after $5,000 minimum:

  • New appliance
  • Painting to change color for personal taste
  • New carpet for personal taste.
  • Installation of Well and/or Septic System
  • Roofing, Gutters, Downspouts
  • Flooring, Tiling and Carpeting
  • Energy Conservation Improvements
  • Major Landscape and Site Improvements (i.e., correction of grading and drainage problems, tree removal, patios/decks, minor shrubbery and landscaping.  Fencing may not be in 1st $5,000.
  • Handicapped Accessibility
  • Painting and Carpeting (only if damaged in some way)
  • Wallpaper

I have added the HUD 203k question and answer page here.

The HUD 203(k) Handbook has extensive and detailed information.

The HUD 203(k) program can be complex. I have developed an excell spreadsheet which will clarify what is possible with the program. Just give me a call.

Please see the Service Area tab for important property location information.

 


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