1. HUD 203(k) Renovation Loan Program
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2. What Is FHA?
FHA is the U.S. Federal Housing Administration, part of the U.S. Department of Housing and Urban Development (HUD).
FHA was established in 1934 to improve housing conditions and ownership opportunities for Americans.
Today, FHA-insured loans have increased in popularity as more and more Americans become aware of the benefits of this powerful U.S. government-backed program.

3. What Is an FHA 203(k) Loan?
The FHA 203(k) renovation loan program provides funds for both the purchase and renovation of a home packaged into one mortgage loan.
Once the purchase of the home is closed, renovation funds are held in escrow to pay for predetermined renovation work done by approved renovation contractors.
The purchase of a house that needs repair is often a Catch-22 situation because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.

4. What Is an FHA 203(k) Loan?
The HUD 203(k) program can help overcome this obstacle by enabling a homeowner to borrow funds for the purchase or refinance of a property plus the cost of making the repairs and improvements in one mortgage.
The FHA-insured 203(k) loan is provided through approved lenders nationwide and is available to owners who will occupy the home themselves.
Down payment, credit qualification, loan limits and other requirements are the same as standard FHA loans. Additional guidelines are set forth specific to 203k loans to provide for renovation of the home.

5. FHA 203(k) Loan Types The Standard 203(k) is intended for:
Projects over $35,000 but can also be used for smaller projects.
May include upgrades, such as bathroom and kitchen updating.
May involve structural changes, such as room additions, exterior grading and landscaping or renovation that would prohibit you from occupying the residence.
A Standard 203(k) is also used if your project requires design drawings, inspections or involves engineering. You will need the services of a 203(k) consultant.

6. FHA 203(k) Loan Types The Streamlined 203(k) is intended for:
Less extensive improvements and for projects that will not exceed a total of $35,000 in renovation and related expenses.
This version does not require the use of a consultant or as many inspections as the standard 203(k); however, a 203(k) consultant can be employed to help expedite the 203(k) loan process and ensure that the project goes as planned.

7. What Improvements Are Eligible?
The HUD 203(k) Streamlined program allows the discretionary improvements and/or repairs shown below:
Repair or replacement of roofs, gutters and downspouts
Repair, replacement or upgrade of existing HVAC systems
Repair, replacement or upgrade of plumbing and electrical systems
Repair or replacement of flooring 
Minor remodeling, such as kitchens, which does not involve structural repairs
Painting, both exterior and interior
Weatherization, including storm windows and doors, insulation, weather stripping, etc.
Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens

8. What Improvements Are Eligible?
Eligible Improvements (cont.)
Accessibility improvements for persons with disabilities
Lead-based paint stabilization or abatement of lead-based paint hazards 
Repair, replacement or addition of exterior decks, patios, porches
Basement finishing and remodeling, which does not involve structural repairs
Basement waterproofing
Window and door replacements and exterior wall re-siding
Septic system and/or well repair or replacement

9. What Improvements Are Ineligible?
Properties that require the following work items are not eligible for financing under the Streamlined 203(k):
Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall
New construction (including room additions)
Repair of structural damage
Repairs requiring detailed drawings or architectural exhibits
Landscaping or similar site amenity improvements
Any repair or improvement requiring a work schedule longer than six months, or rehabilitation activities that require more than two payments per specialized contractor.

10. What Improvements Are Ineligible?
Mortgagors may not use the Streamlined 203(k) program to finance any required repairs arising from the appraisal that do not appear on the list of Streamlined 203(k) eligible work Items or that would:
Necessitate a HUD 203(k) “consultant” to develop a “Specification of Repairs/Work Write-Up”
Require plans or architectural exhibits
Require a plan reviewer
Require more than six months to complete
Result in work not starting within 30 days after the loan closing, or which would cause the homeowner to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted. 
(FHA anticipates that, in a typical case, the homeowner would be able to occupy the property after mortgage loan closing.)

11. Is the Program Allowed for Use by Investors?
A 203(k) loan can be used only by owner occupants, local governments or eligible nonprofits.
An owner occupant can use a 203(k) loan to purchase and renovate up to a four-unit building, as well as a multiuse building in conformance with certain guidelines.

12. Is the Program Only for Single-Family Homes?
No. While you can use it on a single -family dwelling, the program is eligible for use on the following:
One- to four-unit buildings, including the conversion of a building from a larger number of units down to four or fewer.
A condominium unit for improvement of the interior only.
A mixed-use building, such as retail or commercial space combined with residential. In these cases, the 203k loan can only be used for the residential portion of the building.

13. How Is the Home Appraised?
The appraiser is given a copy of the contractor bid documents to identify the repairs and remodeling to be done along with their costs.
The appraiser then determines the value of the home after completion, subject to the improvements to be made.
In some cases, up to 110 percent of this value may be used for loan approval purposes.

14. Can a 203(k) Be Used to Purchase a HUD-Owned Property?
A 203(k) loan can be used to purchase a HUD-owned property determined by HUD to be eligible for 203(k).
If other funds are used for the purchase, then a 203(k) loan can be made up to six months following the purchase, allowing cash back to the owner.

15. Role of the HUD 203(k) Consultant
Required on regular 203(k) loans
Optional on 203(k) Streamlined loans, but may be employed to ensure that loan documents are completed properly and the project is completed correctly
As an inspector, the 203(k) consultant assists the homebuyer by:
Identifying items in need of repair, such as roof, water heater, etc.
Helping buyers compile and prioritize their "wish list" for renovations, such as new carpet, countertops, etc.
Assisting buyers in gathering/reviewing contractor bids
Completing draw and final inspections to ensure that contractor is completing the work as requested
The consultant works with the contractor and lender to develop a draw schedule to complete the renovation
For more detailed answers to these and other questions, contact your National Property Inspections HUD 203(k) Consultant.

16. Thank you!