You can find some great deals on properties sold as is. But sometimes, they need a great deal of work and renovations, too. An FHA 203(k) Renovation Loan may be just the loan you need. FHA 203(k) program allows you to borrow the purchase price of the home minus your down payment, plus money for renovations, all with the convenience of a single loan and closing.
Here are a few of the key features of an FHA 203(k) loan:
- Requires as little as 3.5% down payment to qualify
- Includes most renovations that add value to the property
- Covers materials, labor and expenses such as permits and fees
- Applies to owner-occupied primary residences, from 1-4 units
FHA 203(k) Renovation Loan options (Streamline vs. Standard)
HUD has developed two different FHA rehab/renovation loans called the Standard(k) and Streamline(k). These programs permit home buyers to finance home renovations, repairs or improvements into their loan. With this product, homebuyers can borrow the funds to renovate their property based on the determined value after the renovations are complete.
The two variations of the FHA 203(k) Renovation Loans are compared in the table below. This may be helpful in determining which product will best suit your renovation needs.
Here is a side-by-side look at the distinctions:
| Standard | Streamline | |
| Program description | Major or minor renovation projects allowed including broad scope renovation, both structural and cosmetic. | Geared for minor repairs / improvements where consultants, engineers & architects are not required. Smaller projects. Cosmetic in nature. |
| Occupancy | Owner-occupied | Owner-occupied |
| Terms / Programs | 30-year fixed | 30-year fixed |
| Minimum amount of repairs | $5,000 | $0 |
| Maximum amount of repairs | Limited by FHA loan limits for county. See HUD loan limit website | $35,000 |
| Repairs performed by: | Licensed contractor | Licensed contractor |
| Type of repairs | Structural or cosmetic | Cosmetic |
| Number of draws | 5 draws | 2 draws (50% upfront & 50% after final inspection) |
| Turnaround time | There is no difference in turnaround time between the two products | |
Eligible Renovations for Standard and Streamline FHA 203(k) Renovation Loans
The Standard(k) Repair Program permits homebuyers to borrow the funds to renovate their property based on the determined value after the renovations are complete. The Streamline(k) Limited Repair Program permits homebuyers to finance up to a maximum of $35,000 into their mortgage to improve or upgrade their home before move in.
Below are examples of the different types of renovations that can be made with each loan type. Please refer to your Renovation Lending Specialist for any detailed questions.
FHA 203(K) STANDARD RENOVATION LOANS
FHA 203(k) Standard Renovation Loans allow you to complete major or minor renovation projects including broad scope renovation, both structural and cosmetic.
Some examples of these would be:
- Elimination of health and safety hazards
- Structural alterations and reconstruction
- Changes for improved functions and modernization
- Changes for aesthetic appeal
- Reconditioning or replacement of plumbing, heating, air conditioning and electrical systems
- Installation of well and/or septic system
- Roofing, gutters and downspouts
- Flooring, tiling and carpeting
- Energy conservation improvements
- Major landscape work and site improvement
- Improvements for accessibility to the handicapped
FHA 203(K) STREAMLINE RENOVATION LOANS
FHA 203(k) Streamline Renovation Loans allow you to make minor repairs and cosmetic improvements that do not require consultants, engineers or architects.
Examples of eligible improvements would be:
- Flooring, tiling, carpeting
- Roofing, gutters and downspouts
- New appliances
- Changes for improved functions and modernization
- Changes for aesthetic appeal
Is an FHA renovation right for you?
Find out if you qualify by contacting one of our loan officers:
