The FHA 203K loan program is a government-backed mortgage that lets you finance the purchase of a home and its renovations with a single loan. It’s great for fixer-uppers since it covers repair costs rolled into your mortgage. There are two types of 203K options; Standard 203K for bigger projects and the Limited 203K for smaller ones. The property has to meet FHA standards after the repairs.

Pitcute of renovated kitchen

Source: AI Generated Picture

Program Details:

Eligible Property Types:

  • One- to four-unit Single Family Structures
  • Condominium Units
  • Site Condominium units
  • Manufactured Housing (with limitations on structural modifications)

Financing Aspects:

  • Mortgage Fees
  • Contingency Reserves
  • Mortgage Payment Reserves
  • Up to 110% of the After Improved Value (100% for condominiums)

Consultant Requirements:

  • An FHA-approved 203(k) Consultant is required for Standard 203(k) Mortgages
  • May be used for Limited 203(k) Mortgages
  • Must be listed on the FHA 203(k) Consultant Roster

Consultants can include fees for:

  • 203(k) Consultant fee (subject to schedule limits)
  • Inspection fees during construction
  • Title update fees
  • Permits
  • Feasibility Study (when necessary)

Additional Program Features:

  • Mortgagees can use the mortgagor's contractor or engage another qualified contractor
  • Funds can be released in stages for work items
  • Focuses on protecting occupants and collateral

Details about the Limited 203k:

  • It may only be used for minor remodeling and nonstructural repairs
  • The total rehabilitation costs must not exceed $75,000.
  • A 203(k) Consultant is not required, but may be used
  • Eligible improvements include:
    • Eliminating health and safety hazards
    • Repairing or replacing wells and/or septic systems
    • Connecting to public water and sewage systems
    • Remodeling kitchen, bathrooms, flooring and paint

 

Details about the Standard 203k:

  • The Standard 203(k) requires a minimum repair cost of $5,000
  • A 203(k) Consultant is required for Standard 203(k) Mortgages

Eligible improvements include:

  • Converting a one-family Structure to a one-family Structure with an ADU (Accessory Dwelling Unit)
  • Converting to a two-, three-, or four-family Structure
  • Adding an Accessory Dwelling Unit (ADU) attached to an existing Structure
  • Renovating an existing ADU (attached or unattached)
  • Repairing or replacing foundation
  • Making structural alterations
  • Repairing structural damage
  • Adding additions to the Structure
  • Finishing attics and/or basements
  • Rehabilitating, improving, or constructing a garage
  • Eliminating health and safety hazards that violate HUD's Minimum Property Requirements (MPR)

This program provides a comprehensive solution for homeowners looking to purchase and rehabilitate a property or improve an existing home through a single mortgage.