HUD FHA 203k Renovation Guidelines On Home Improvement Loans

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This ARTICLE On HUD FHA 203k Renovation Guidelines On Home Improvement Loans Was PUBLISHED On November 20th, 2019

What are HUD FHA 203k Renovation Guidelines On Home Improvement Loans

Home values are appreciating nationwide.

In this article, we will cover and discuss HUD FHA 203k Renovation Guidelines On Home Improvement Loans.

HUD FHA 203k Renovation Guidelines And How It Works

What are HUD FHA 203k Renovation Guidelines And How It Works

HUD FHA 203k Renovation Guidelines allow homebuyers to purchase fixer-uppers and homeowners to pay their existing mortgage and get a new acquisition and construction financing for home improvement.

  • Very little equity is required
  • HUD allows buyers of fixer-uppers to purchase a home with construction financing with 3.5% of the after improved value
  • This loan program can benefit those who want cosmetic repairs or major renovations
  • It is the next best loan program for those who want a brand new home

There are two types of FHA 203k Loans which we will explain in this article.

HUD FHA 203k Renovation Guidelines On Home Purchases

What are HUD FHA 203k Renovation Guidelines On Home Purchases

HUD FHA 203k Renovation Guidelines allow homebuyers to purchase fixer-uppers with a special loan program.

  • The loan program is where the lender will provide the acquisition and construction financing with one loan program and closing
  • It is available for both homebuyers needing an acquisition and construction loan as well as homeowners who need construction financing

For home buyers, the program requires a 3.5% down payment on the after improved value. For homeowners, the new 203k loan will pay the outstanding loan balance on the existing loan and the lender with getting the borrower a new loan. The new loan pays off the existing mortgage and provides construction financing.

HUD FHA 203k Renovation Guidelines On Streamline

What are HUD FHA 203k Renovation Guidelines On Streamline

There are two types of FHA 203k Loans:

  • FHA 203k Streamline
  • Full Standard FHA 203k Loan

The 203k Streamline is also referred to as a Limited 203k Rehab Loan. The maximum loan cap on streamlines is $35,000.

  • The FHA Streamline 203k is also known as a Limited 203k.
  • The rehab cost is capped at $35,000.
  • Eligible activities and scope of work are limited
  • You cannot make structural changes
  • No room additions
  • All work need a licensed HUD-approved contractor
  • Scope of work includes cosmetic renovations such as painting, floors, millwork, roof, windows, gutters, appliances, HVAC, and other work

Cosmetic repairs do not enhance property value. HUD realizes this and the maximum loan to value allowed is 110% of the appraised value.

Renovation Guidelines On Full Standard 203k Home Improvement

What are Renovation Guidelines On Full Standard 203k Home Improvement

FHA 203k Renovation Guidelines on full standard home improvement loans allow the following type of work:

  • There is no maximum construction limit
  • The after improved value loan amount cannot exceed the maximum FHA loan limit for the area
  • Any scope of work that is allowed on the streamline 203k loan can be done with the standard 203k
  • Plus, the standard full 203k loan allows additions, structural, and gut rehab done as long as the maximum loan amount does not exceed the FHA county limits
  • The types of improvements are not limited to relatively minor activities, but the virtual reconstruction of a home

A certified HUD-approved consultant is required.

Types Of Properties Eligible

What are Types Of Properties Eligible

FHA 203k Loans are for owner-occupant primary homes only. Second homes and investment properties are not eligible.

The following property types are eligible for FHA 203k Renovation Loans:

  • Single-family homes
  • Townhouse and/or PUDs
  • Condominiums
  • Two to four-unit multi-family properties

Mixed-use properties where the residential unit is more than 51% are eligible.

General Contractors

Who are General Contractors

The homeowners cannot act as their own general contractor. A HUD-approved general contractor is required on FHA 203 Renovation projects. The general contractor needs to be HUD-approved and has been trained at a certified training facility. General contractors can register their company. A HUD consultant is required on full standard FHA 203k loans. For more information about FHA 203k Loans and to qualify, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com.

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