HUD FHA 203k Renovation Guidelines

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

Home values are appreciating nationwide. Both HUD and the FHFA increased FHA and Conforming Loan Limits the past three years due to rising home prices. FHA Loan Limits are now at $356,362. The Federal Housing Finance Agency (FHFA) increased the Conventional Loan Limit to $548,250 for 2021. President Donald Trump signed into law exempting VA Loan Limits. There is no longer a maximum VA Loan Limit. The U.S. economy is booming. Home prices are increasing with no signs of any housing correction. There is a major shortage of homes in most counties. The implementation of new mortgage programs such as Non-QM Loans and alternative financing is adding additional demand of home buyers entering the market.

Mortgage rates are now at an all-time low since the 2008 Great Recession. Unemployment numbers are getting lower every quarter since the pandemic has started. There are more jobs available than qualified workers. The Dow Jones Industrial Averages are setting record highs every day. Never in history did we have such a great economy for such a long time without a recession. HUD FHA 203k Renovation Guidelines allow homebuyers and homeowners to qualify for an acquisition and construction home loan with as little as a 3.5% down payment and little equity in their homes.

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

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

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

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 needs 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

Renovation 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

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

The homeowners cannot act as their own general contractors. A HUD-approved general contractor has 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 800-900-8569 or text us for a faster response. Or email us at

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