Using FHA and 203(k) Loans to Complete Your Remodeling Project

Using FHA and 203(k) Loans to Complete Your Remodeling Project

Whether you currently have an FHA mortgage, or not, you can take advantage of the current
extremely low rates.

Benefits of Using an FHA Loan:
Easier qualification
Flexible loan programs
Credit scores may qualify from 580 up
Low down payment options
Down payment can come from gift funds
15, 20, and 30 year fixed-rate mortgage options
No prepayment penalties

The 203k loan is a specialized renovation or construction loan, backed by the Federal Housing
Administration. It is available to both buyers and refinancing households, and combines the
traditional “home improvement” loan with a standard FHA mortgage, allowing homeowners to
borrow their renovation and remodeling costs.

The FHA is broad with the types of repairs permitted with a 203k loan. However, depending on
the nature of the repairs, borrowers may be required to use the “standard” 203k home loan as
compared to the simpler, faster Streamlined 203k.

FHA Fixer-Upper Loan
Planning to buy a fixer-upper, or make improvements to your existing home? The FHA 203k
loan may be your perfect home improvement loan

The FHA lists several repair types which require the standard 203k:
Relocation of loan-bearing walls
Adding new rooms to a home
Landscaping of a property
Repairing structural damage to a home
Total repairs exceeding $35,000
For most other home improvement projects, borrowers should look to the FHA Streamlined 203k
The FHA Streamlined 203k requires less paperwork as compared to a standard 203k and can
be a simpler loan to manage.

A partial list of projects well-suited for the Streamlined 203k program include :
HVAC repair or replacement
Roof repair or replacement
Home accessibility improvements for disabled persons
Minor remodeling, which does not require structural repair
Basement finishing, which does not require structural repair
Exterior patio or porch addition, repair or replacement
Borrowers can also use the Streamlined 203k loan for window and siding replacement; interior
and exterior painting; and, home weatherization

The Standard 203k is intended for more complicated projects that involve structural changes,
such as room additions, exterior grading and landscaping, or renovation that would prohibit you
from occupying the residence. A Standard 203k is also used if your project requires engineering
or architectural drawings and inspections.

The Streamlined 203k is designed for less extensive improvements and for projects that will not exceed a total of $35,000 in renovation and related expenses. This version does not require the use of a consultant, architect, and engineer or as many inspections as the Standard 203k. As a result, when applicable, the Streamlined 203k generally becomes the simpler, less costly option. Your REbuildUSA 203k Specialist™ and your FHA approved lender will help you determine which loan is the best choice to meet your needs.

What improvements are eligible under the Streamlined 203k?
The Streamlined 203k program is intended to facilitate uncomplicated rehabilitation and/or
improvements to a home for which plans, consultants, engineers and/or architects are not
required. This program allows discretionary improvements and/or repairs shown below:

Repair/Replacement of roofs, gutters and downspouts
Repair/Replacement/upgrade of existing HVAC systems
Repair/Replacement/upgrade of plumbing and electrical systems
Repair/Replacement of flooring
Minor remodeling, such as kitchens, which does not involve structural repairs
Painting, both exterior and interior
Weatherization, including storm windows and doors, insulation, weather stripping, etc.
Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/
dryers, dishwashers and microwave ovens
Accessibility improvements for persons with disabilities
Lead-based paint stabilization or abatement of lead-based paint hazards
Repair/replace/add exterior decks, patios, porches
Basement finishing and remodeling, which does not involve structural repairs
Basement waterproofing
Window and door replacements and exterior wall re-siding
Septic system and/or well repair or replacement

What items are ineligible for the Streamlined 203k?
Properties that require the following work items are not eligible for financing under the
Streamlined 203k:

Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall;
New construction (including room additions);
Repair of structural damage;
Repairs requiring detailed drawings or architectural exhibits;
Landscaping or similar site amenity improvements;
Any repair or improvement requiring a work schedule longer than six (6) months; or
Rehabilitation activities that require more than two (2) payments per specialized contractor.

Mortgagors may not use the Streamlined 203k program to finance any required repairs arising from the appraisal that do not appear on the list of Streamlined 203k eligible work Items or that would:

Necessitate a “consultant” to develop a “Specification of Repairs/Work Write-Up”;
Require plans or architectural exhibits;
Require a plan reviewer;
Require more than six months to complete;
Result in work not starting within 30 days after loan closing; or Cause the homeowner to be
displaced from the property for more than 30 days during the time the rehabilitation work is
being conducted. (FHA anticipates that, in a typical case, the homeowner would be able to
occupy the property after mortgage loan closing).