203k Rehabilitation Loans

FHA Standard 203k Loans

FHA Standard 203k Loans

What is the FHA Standard 203(k) Renovation Loan?

A renovation mortgage provides financing of both the purchase or refinance of a home, and the cost of repairs, upgrades, or updates to the property. Among the most popular and well known of the renovation loans available in the market, the FHA Standard 203(k) Rehabilitation Loan is intended for larger projects and those that include structural repairs.


Standard 203(k) Mortgage Basics

  • Total renovation costs must be at least $5000

  • Use of a 203(k) consultant, an expert involved throughout the process including estimating the cost of repairs and inspecting the work performed, is required

  • The appraisal repot must provide an “as completed” appraised value that estimates the value of the property after the completion of the renovation work

  • 8 year, 10 year, 15 year

  • Primary residences only


Who is eligible for an FHA Standard 203(k) Renovation loan?

This program is to be used to renovate an existing property, not build a new construction home. The home must have been completed at least 1 year before the case number assignment date for the new 203(k) loan to qualify. Eligibility will be determined by examining the borrower’s income, assets, liabilities and credit history and score, as well as the market value and condition of the property to be financed.


Some of the requirements include:

  • Minimum repair cost $5,000

  • Use of a 203(k) consultant is required

  • Only 1 general contractor may be used

  • Work must begin within 30 days of the execution of the agreement

  • Work must be completed within 6 months, or the time period dictated in the agreement, whichever is shorter

  • The amount borrowed must be within FHA loan limits, which vary by county and are higher in parts of the country where real estate is more expensive

  • 620 minimum FICO score

  • Projects must only include allowable improvements

Some examples include:

  • Structural alterations and/or additions (with upfront approval)

  • Upgrade or modernization of central air/ heat, plumbing, and electrical systems

  • Repair or replace well and/or septic systems

  • Repair termite or moisture damage

  • Elimination of health and safety hazards such as asbestos and lead based paint abatement

  • Basement waterproofing

  • Remodeling of kitchen and bathrooms

  • Roofing, gutters and downspouts

  • Flooring, tiling, and carpeting

  • Interior and exterior painting

  • Siding, windows, doors and trim work

  • Energy conservation improvements

  • Improvements for disability accessibility

  • New free-standing appliances

  • Foundation repair

  • Addition or replacement of exterior decks, patios, terraces and porches

  • Permanent hardscape such as driveways, walkways, retaining walls and fences

Some improvements aren’t approved for financing through an FHA 203(k) loan, such as:

  • Improvements that are not permanently attached to the property

  • Improvements for business or commercial purposes

  • Landscaping that is not permanent “hardscaping” such as sod, trees, shrubbery or their removal

  • Luxury items such as swimming pools, hot tubs, tennis courts, gazebos, outdoor kitchens or saunas


Buying a home with Standard 203(k) Mortgage

This program is ideal for buying a fixer upper, distressed property or out of date home. It can also save the deal should major issues be uncovered during a home inspection. Rather than walk away from a home they love, home buyers can finance the purchase with an FHA 203(k) loan and have the funds needed to cover the cost of the repairs.


Standard 203(k) Renovation Home Loan Refinancing

Consumers may not be aware that renovation loans, including the FHA Standard 203(k) Renovation Loan, can be used to refinance an existing mortgage. This can be an excellent alternative to a second mortgage or a cash-out refinance when the funds will be used to repair or renovate the subject property.

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