Standard FHA 203k Loans For Buyers Of Fixer Uppers


This BLOG On Standard FHA 203k Loans For Buyers Of Fixer Uppers Was UPDATED And PUBLISHED On February 11th, 2020

What are the standard FHA 203k loans for buyers of fuser uppers

There are two types of FHA 203k Loans:

  • Streamline FHA 203k Loans
  • Standard FHA 203k Loans

The Streamlined FHA 203k Loans is a great acquisition and construction FHA Rehab Loan Program but it is for minor rehab. You are only limited to a construction budget of $35,000 with a Streamlined FHA 203k Loan Program and cannot do structural changes and/or room additions.

In this article, we will discuss and cover 203k Loans For Buyers Of Fixer-Uppers.

Streamline Versus Full FHA 203k Loans

Here is what you can do with a Streamline FHA 203k Loan Program:

  • Maximum construction budget limited to $35,000
  • Cannot do room additions or structural changes
  • Can replace appliances such as refrigerators, washer, dryer, dishwashers
  • Can replace and/or fix HVAC systems
  • Can replace or refurnish flooring, carpeting, hardwood floors, tiles, walls, painting, millwork, doors, windows, siding, roofing, gutters, soffits, fascia, and other cosmetics
  • Can remodel bathroom, kitchens, and rooms

Cannot do outdoor luxury items such as install outdoor kitchens, tennis courts, add jacuzzi tubs, or swimming pools.

Full 203k Loans

Which means Full 203k Loans

With the full 203k Loans, borrowers can do all of the above plus more. Standard 203k Loans are for larger construction projects such as the following:

  • All jobs that can be done with Streamlined 203k, homeowners can do it with Standard FHA 203k Loans
  • Complete gut rehab projects
  • Room additions which include two-story additions or side additions
  • Standard FHA 203k Loans allows the homeowners to make structural changes
  • They can add on to the existing square footage of the home
  • Allows homeowners to build on the existing foundation of the home
  • Or relocate the existing home and move it to another location
  • Repairs are over $35,000
  • There is no construction limit as long as the acquisition and construction loan amount does not exceed the maximum FHA Loan Limits for the area
  • Unlike the Streamline FHA 203k Loans where the maximum contractor draw is limited to two, with Standard FHA 203k Loans, HUD 203k Contractor can ask up to 5 construction draws

HUD FHA Inspector needs to come out to inspect the work completed prior to each draw request from 203k Contractor to make sure that the work has been completed before the cash is released.

Types Of Work That Is Permitted With FHA 203k Loans

Here are additional work that can be done with Standard FHA 203k Loans

  • With the Standard FHA 203k Loans, structural alterations and room additions can be performed
  • Attached or detached garages can be built
  • Kitchens, bathrooms, and bedrooms
  • Alterations to reduce obsolescence as well as to reduce maintenance
  • Complete replacement of electrical, plumbing, and HVAC systems
  • Replacement and/or installation of wells and/or septic systems
  • Roofing, gutters, soffits, and downspouts
  • Flooring, hardwood floors, tiles, and carpets
  • Energy savings systems and/or upgrades
  • Major landscaping projects to the subject property
  • Accessibility changes and/or enhancements
  • New non-attached home appliances
  • Exterior and interior improvements
  • Existing swimming pool and/or jacuzzi repairs
  • Any home improvement project that is a PERMANENT part of the subject property
  • Luxury projects such as the addition of new outdoor kitchen or other amenities are not permitted

Standard 203k Loans require an approved HUD Home Consultant which the borrower chooses from the list of HUD-approved lists of consultants.

Pros And Cons With FHA 203k Loans

What are the pros and cons of FHA 203k loans?

Standard 203k Loans can be extremely lucrative for the right home buyer. Many home buyers can buy fixer uppers and do a complete gut rehab and customize their home like a brand new house with structural changes and remodeling as follows:

  • Customize the whole structure to the home
  • Do second story additions or side additions to the existing home such as adding on an office, extra bedroom, combining rooms, or adding on a master suite with additional master bath
  • Choose the type of flooring they want throughout their homes such as carpeting, hardwood flooring, or tiles
  • Repaint the whole house and rooms to the color of their preference
  • Complete change windows and add bay windows
  • Strip the exterior and add new siding or brick veneer
  • Square footage adds value to the existing home

Additional square footage adds value to the home. If the homeowner is planning on doing a room addition with their FHA 203k Loan, that can add substantial value to their property and get instant equity once the addition is complete. For example, if a homeowner is planning on doing a 1,000 square foot room addition and that cost may be $50,000, the after improved value due to that addition may be an overall increase of the market value of $100,000 depending on the area the property is located.

Negatives Of Renovation Loans

Negatives of Standard FHA 203k Loans are the following:

  • Large rehab projects can be stressful
  • There are times where contractors and homeowners have conflicts
  • There are potential where the homeowner fires the contractor and needs a new contractor
  • Choosing the right general contractor who is experienced is extremely critical and very important
  • Large construction projects take time
  • Larger rehab projects, especially room additions can take several weeks if not months
  • Delays can happen especially with building permits
  • Mortgage rates are higher with FHA 203k Loans due to the added layered risk
  • Qualification requirements to qualify for FHA 203k Loans are the same as regular FHA Qualification Requirements
  • There is no manual underwriting allowed with FHA 203k Loans:
    • Both Streamlined and Standard FHA 203k Loan Programs

The above are pros and cons with Standard FHA 203k Loans. However, the pros definitely outweigh the cons and many homeowners benefit, especially with instant equity, after the completion of their Standard FHA 203k Loans.

If you are interested in learning more about both Streamlined and Standard FHA 203k Loans, contact us at  Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at We are available 7 days a week, evenings, weekends, and holidays to take your call or mortgage inquiry.

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