The ten most feared words for most people is “I’m from the government & I am here to help”, well in this case it may be a good thing for you.
The Federal Housing Administration (FHA), which is part of the Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. The Section 203(k) program is the Department’s primary program for the rehabilitation and repair of single family properties. While this program fell out of favor during the housing boom with other loans not requiring inspections, it has gained traction again as one of the few types of loans that can still be gotten for repairs.
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How the Program Can Be Used: This program can be used to accomplish rehabilitation and/or improvement of an existing one-to-four unit dwelling in one of three ways: To purchase a dwelling and the land on which the dwelling is located and rehabilitate it. To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it. To refinance existing liens secured against the subject property and rehabilitate such a dwelling.
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Eligible Improvements (Normal Version): There are plenty of eligible improvements allowed on 203K loans like: Bathroom remodels, Kitchen remodels with new appliances, Making a house handicap accessible, Whole house renovations & remodeling, Finishing the basement, New deck &/or patio, Flooring Replacement, New doors and windows, Upgrading the HVAC system, Additions, Roofing, Painting, Upgrading the plumbing & / or electrical, Energy efficient improvements, Wells and septic tank repair and upgrades
Section 203(k) Streamlined Program: The maximum repair amount allowed is $35,000 with no minimum amount that can be taken for repairs. The funds will be escrowed at closing and released as the work is completed. However, the following items are not allowed under this program; complete house remodeling, new construction, structural issues or changes, & landscaping. All work must be able to be completed within three months and must start within 30 days of closing.
So what’s the catch? The program did fall out of favor during the housing boom due to the fact that inspections are required & minimum standards had to be met. The FHA requires that all doors and windows have adequate weather stripping; cracks, or joints in the building must be sealed to reduce air infiltration; all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation be insulated; ceiling areas must be insulated where necessary; attic and crawl space areas must be adequately ventilated; each sleeping area must be provided with at least one approved smoke detector; HVAC systems if replaced must be sized properly & insulated; work performed must conform with all state & local building codes.
The other catch is the hold back times & paperwork that is required to be filled out by the contractor & others which most contractors do not want to deal with. At SLS Construction we have no problems handling the paperwork or the inspection requirements. We truthfully believe that all requirements listed should be taken care of normally and most required codes are actually minimum standards that should be met or exceeded.
To find a 203(k) lender near you – Approved 203(k) Lender’s �
For more information on 203(k) program – HUD’s 203(k) Program