The FHA 203k full rehab
loan allows buyers the ability to finance major or minor upgrades on
a home without having to get the work done before closing. Consumers
can not buy a home needing foundation repairs without a renovation loan
that can handle rolling in of structural repairs.
How many times have you viewed a property and wished you could replace the carpet or update the kitchen? Or worse case you find out there are foundation issues. With the 203k loan you may and finance the costs and custom design your dream home.
This is also a great loan for seller’s wishing to market their home
to potential buyers and a perfect solution for a buyer with limited
Here are a few details of the 203k loan:
- Allows repair/renovation costs can be rolled into the loan
- Major items (such as foundation and roof work) ARE allowed
- Low down payment (3.5%) and the seller can pay up to 6% towards closing costs
- Close before rehab/repair work being – this allows the seller and the agent to be paid upfront
- Only one closing – money is disbursed on a draw schedule after closing
- Loan can go up to 110% of “after-improved value” from appraisal
- Buyer can include optional renovations
The work is supervised by the General Contractor and the 203k Consultant.
Draw requests are made by the 203k Consultant and he/she will also
perform the final inspection. Generally speaking these projects are completed in 6 months or less.
What is the Standard FHA 203k Loan?
Using the FHA 203k full renovation loan program, much more extensive and substantial repairs or remodeling can be accomplished.
So, you can imagine that the process is a bit more involved. This
program also requires that you obtain a 203k Consultant. The Consultant
is someone that is knowledgeable about construction and/or rehab and
who knows the 203k program.
They will come to the property and meet with you to discuss the
anticipated improvements you want to make to the house. They will
inspect the property for any health and safety issues required to be
included in the rehab and will then provide you with a “Work Write-up”
for the project based on the work you would like to have done. This
will also be the person who handles all of the draw request and
inspections along the way.
Think of the FHA 203k loan as a mini construction or “one time close construction“ loan
program where your contractor can ask for as many as 5 draws, and each
draw request will need to have an inspector come out to make sure the
work has been completed for that draw request prior to any monies being
Because it is more involved than a standard loan, there are more costs involved.
Type of work for a Standard FHA 203k:
- Structural alterations and additions (with upfront approval)
- Upgrade central air/heat
- Repair termite or moisture damage
- Remodeled kitchen and baths
- Changes to eliminate obsolescence and reduce maintenance
- Modernize plumbing, heating, AC and electrical systems
- Install or repair well or septic systems
- Roofing, gutters, downspouts
- Flooring, tiling and carpeting
- Energy conservation improvements
- Major landscaping
- Improvements for accessibility
- New free standing appliances
- Interior and exterior painting
- Foundation repair
- Swimming Pool repairs (not to exceed $1,500)
- Other improvements that are a PERMANENT part of the real estate*
*Luxury items are not permitted to be included in the financing.
Below are some frequently asked questions about the program
What is the role of a HUD 203(k) consultant?
- To do a Property Inspection/Report
- To work with you discussing your renovation needs
- To prepare a Work Write-up and any required architectural and/other exhibits
- To do Draw Inspections, Change Orders and Final Inspection
- To be a liaison between you, the lender and your contractor
- To insure that work is completed in a timely and professional manner
- To watch over the monies spent on behalf of you and your lender
The Contingency Reserve
- 10% to 20% depending on the work involved
- Used for unforseen repairs
- With upfront lender approval this money may be used for extras such as appliances
- At the end, any left over money will become a principle reduction
How are the Contractors paid?
There is no up-front money
to the contractor on the FHA Full 203k. The first check will be cut
only after the work has begun and the consultant has preformed the first
inspection. In Texas work may begin 3 days after closing and funding.
Contractors can have a maximum of 5 draws altogether. The FHA 203k HUD consultant will divide the work into draws depending on the scope of work to be done.
You may do the framing first, then the heating and electric, then the
drywall for example. If each of those were in separate draw schedules,
the contractor would get paid for each of those as they are completed
and depending upon which draw they were to be counted in.
The consultant will go out to see that the work described under the
first draw has been completed and will submit a request for that draw.
For each of these draws a 10% contingency is held. Again, this is just
to be sure there are no surprises and that all of the work is completed
To check out my profile, references and the references of the other agents, just click on my picture to go to my profiles and read what our clients say about us. Pick the broker that you think is right for you. Of course I hope it’s me, but if not then best wishes!
Search on MLS here:http://www.thepremiumproperties.idxco.com/idx/3935/advancedSearch.php
Highest and best regards.
Vincent Paige |REALTOR® | RE/MAX Showcase
Major, U.S. Army (Reserve)
Certified Broker Price Opinion Registered Agent (BPOR)
Florida Military Specialist (FMS)
8934 Conroy Windermere Road | Orlando, FL 32835
Direct: 407.256.8190 | Fax: 407.264.8073
Search for homes here: http://www.thepremiumproperties.com