Remodel & Renovate in 60901>Question Details

Jon, Home Buyer in 60901

Looking at a 203K, if the current mortgage balance is $120K and we do $50K in improvements, what would house need the "after" appraisal to

Asked by Jon, 60901 Sun Dec 26, 2010

be? What we are looking to do it replace all windows and siding in our current house, would also like to redo the kitchen and possibly repair a wet basement, but with a mortgage balance of $120K, will be batting the LTV.. House appraised for $138K 2 years ago.. Will new siding an quality windows plus possible kitchen redo increase the appraisal to where it needs to be?

Also have a wet basement, will FHA require it to be fixed? Or can we wait and do that later on?

Help the community by answering this question:


To assure that the mortgage is adequately supported by the property value, the maximum 203(k) mortgage amount must be based on the LESSER of the: "as-is" value plus the cost of repairs (and improvements), or if an "as-is" appraisal is not performed, the contract sales price on a purchase transaction plus the repairs costs, or the existing debt on a refinance plus the repair costs, or 110 percent of the "after improved" value.
There may be a chance that the FHA 203(K) may insure up to 110 percent of the improved value, this will all depend on the most recent home sales in your area.
The wet basement will need to be fixed as part of your rehab with the 203(K) loan. The property will need to meet FHA minimum property standards and part of the loan will need to go to repair the wet basement and any other system that does not meet the minimum standards.
I hope this helps and you can call me anytime and I will try to answer all of the questions you may have.

Ed Mendelson
203(K) Consultant
1 vote Thank Flag Link Sun Dec 26, 2010

Ed's answer below is pretty good, particularly on the required improvements. The wet basement will have to be fixed with the other repairs.

Your maximum loan amount will be the lesser of the following two amounts: 1) the sum of your existing mortgage on the property, the estimated cost of repairs, and allowable closing costs, or 2) 97.75% of 110% of the after-improved, appraised value.

Basically, FHA will allow you on the FHA 203k loan to have a loan above the appraised value. So, if your house appraised for $138,000 again today, your maximum loan amount would be $148,384. Anything above that you can bring to the closing table to put into escrow.

It's hard to say in today's environment what value an appraiser will put on your repairs and updates.

Also, keep in mind, that your cost is not just the $50,000 in repairs, but with the FHA 203k loan there are other soft costs involved such as a contingency reserve (usually 10-20% of the estimated cost of repairs), FHA plan consultant fee, supplemental origination fee, permits, draw inspections and title updates, in addition to normal mortgage closing costs.

Call me if you have any questions. We specialize in the FHA 203(k) loan. Check out our blog at We have several articles on the FHA 203(k) loan in the archives.

Bradley Eggers
Senior Loan Originator
Ardain Mortgage
847-963-1000 (office)
847-744-0168 (cell)
0 votes Thank Flag Link Mon Dec 27, 2010
When it comes to 203K Loans the short answer is the house must appraise for total of the Loan (House Price + Inmprovements). Since this is an FHA product, the house must conform to all FHA guidelines, so the wet basement may have to be repaired at the same time the other work is being done.

You have a 6 month period to have all work completed. Just make sure your contractor is on the approved list with your lender. The contractor must prepare a complete quote, as this quote is supplied to the appraisor, The contractor is paid through escrow.
0 votes Thank Flag Link Sun Dec 26, 2010
If the house appraised at $138k 2 years ago I would guess that it is in the $115k range today. It seems hard to think new siding, new windows and a redone kitchen would bring that up to $170k which is what it would need to be if I understand your numbers. I would speak to the 203K people at the bank and see if they can get you to a contractor to give you a guesstimate based on what you want to do.
0 votes Thank Flag Link Sun Dec 26, 2010
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