FHA 203k Remodeling
An FHA 203k loan, (sometimes called a Rehab Loan or FHA Construction loan) allows you to finance not one, but two major items 1) the house itself, and; 2) needed/wanted repairs. Because the lender tracks and verifies repairs, it is willing to approve a loan on a home it wouldn’t otherwise consider. The loan addresses a common problem when buying a fixer home: lenders often don’t approve loans for homes in need of major repairs. A home must meet certain safety and livability standards. Some home buyers are handy enough to buy the house and fix it up themselves. But, if the home is too run down, you can’t get a loan in the first place. The 203k lets you buy and fix up a house in one transaction, allowing the lender to approve the loan despite its initial condition. Maxwell Building Services are 203k loan contractors that can help you with remodeling and installation after your loan is approved.
There are two types of 203k loans. Which one you choose depends on the extent of the repair work.
Limited 203k mortgage (formerly known as the 203k Streamline)
This option allows you to do most cosmetic repair work. Things like kitchens and bathrooms.
The stated limit to costs is $35,000. However, an FHA 203k loan requires a “buffer” equal to 15 percent of the total bids. This buffer is called a contingency. It’s a “just in case” fund to cover cost overruns by your FHA loan contractor. (If the contingency fund is not used, it is credited back to you). So, your “real” maximum repair job can cost around $31,000.
Most non-structural, non-luxury items are acceptable:
- Kitchen and bathroom remodels
- Appliance replacement
- Carpet and flooring
- Roof replacement
- Repairing safety and health issues
- Energy-efficient improvements
- And much more
In short, you can’t do anything structural (move load-bearing walls, add rooms) or change the footprint of the home.
So why choose the Limited 203k option? Because more lenders offer it than the full 203k. And, it’s a much simpler process than the standard option.
With this option, you can do just about anything you want to the home, except non-permanent changes or adding luxury amenities.
- Convert a one-family home into a 2-, 3-, or 4-unit home, or vice versa
- Connect to public sewer or water
- Some larger landscaping projects
- Improve accessibility for disabled persons
- Move the house to a different site
If you are interested in FHA 203k loan remodeling, call us today to speak to someone at our FHA 203k remodeling firm. An FHA 203k loan contractor will speak with you about your best options and answer any lingering questions you may have.