FHA 203(k) Renovation Loan
Among the most popular and well known of the rehab loans available, the FHA Standard 203(k) Rehabilitation Mortgage is used to finance both the purchase and work done on homes in need of extensive renovation and/or structural repairs.
This program can help a buyer completely transform a home, whether that means foundation repairs and a new roof, or a beautiful modern kitchen, hardwood floors, and the addition of a master suite. Buyers can even get into a home for just $100 down when purchasing a home own by HUD. Visit the HUD Home Store to see if there are any HUD - owned homes near you.
THE BASICS
- Total renovation costs must be at least $5,000
- Use of a 203(k) consultant, an expert involved through out the process including estimating the cost of repairs and inspecting the work performed, is required
- Eligible properties include 1 – 4 unit primary residences, Manufactured Housing, FHA Approved Condominiums, Site Condominium, PUDs and HUD REO
- The appraisal report must provide an “as completed” appraised value that estimates the value of the property after completion of the renovation
- Work must begin within 30 days of the execution of the agreement, and completed within the time period dictated by the agreement, which can be no longer than six months
BENEFITS OF THE FHA STANDARD 203(k)
Complete the rehabilitation quickly
Buyers may love the idea of renovating a distressed property, but have no desire to live in a construction zone for the next five years. This is often the reality for owner financed rehabs, where projects are tackled one-by-one or room-by-room over time as money is available. With a Standard 203(k) Rehabilitation Mortgage, the funds are at the ready to cover the extent of the repairs. Your clients could be enjoying life in the home they dream of in weeks or months rather than years.
Live elsewhere until the work is complete
The renovation funds can include enough to cover the cost of alternate housing for up to six months. Anyone who has shared their home with scores of contractors or washed dishes in the bathroom sink for several weeks will immediately understand what a beneficial feature this is!
Refinance options available
Not strictly a purchase program, the FHA Standard 203(k) Rehabilitation Mortgage can be an excellent solution for homeowners looking to finance major improvements to an existing property.
FHA LIMITED 203(k) REHABILITATION MORTGAGES
This program is used to finance both the purchase (or refinance) of, and repairs or renovations to a home with one mortgage loan. A scaled down version of the FHA Standard 203(k) loan, the Limited 203(k) allows for rehabilitation costs up to $75,000, and is intended for simple repairs and remodels, updates and upgrades, but not for major or structural renovations.
According to the National Association of REALTORS® 2015 Profile of Home Buyers and Sellers, a lack of inventory in many parts of the US is leading buyers to “purchase more expensive homes as prices increase.” Currently it is taking buyers on average 10 weeks to find a home to buy.
Would updated kitchen cabinets, a fresh coat of paint, and a new patio turn a home into one that’s worth a second look? When buyers consider what a home could be, rather than how it looks today, it can open up a limited inventory and create many more exciting options.
THE BASICS
- Cost of work cannot exceed $75,000 – There are no minimum repair costs
- Eligible properties include 1 – 4 unit primary residence, Manufactured Housing, FHA Approved Condominiums, Site Condominium, PUDs and HUD REO
- The appraisal report must provide an “as completed” appraised value that estimates the value of the property after completion of the renovation work – Up to 110% of this after-improved value can be borrowed
- Must work with a General Contractor (licensed as required in the state/municipality of the home) – DIY projects are ineligible