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We own a three family house and had started our refinance with another mortgage broker who literally wasted a lot of our time and money and left us very frustrated because he accomplished absolutely nothing on our behalf. We continued to struggle wondering how we were going to make the mortgage payments each month (due to increased costs i.e.utilities, etc.) when someone suggested that we call Mr. Noble. Wow, what a difference in quality of service and, most importantly, results. We were able to reduce our monthly payments by $431 a month, get cash, which we desperately needed, and clear all title issues we had from our prior refinances. Before this refinance, our house was recorded under the wrong section, block and lot numbers, wrong street address, and our names on the title were misspelled. Being a Real Estate Attorney as well as a Mortgage Broker, Mr. Noble discovered these errors and was able to fix them (charging no additional fee) and gave us back our piece of mind by clearing up this nightmare that we were dealing with for years. Thank you, Mr. Noble and your dedicated staff, for your superb job! Keep up the excellent work.

Vincent Calascione and Suzan McGovern
July 23, 2009

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HOME / 203K Renovation Loans  


With a 203K loan the borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.

Before After

Before Home Renovation

After Home Renovation

Eligible Properties: 1-4 family, Condo, Mixed-Use*

Minimum Down Payment: 3.5% of the loan amount including repairs and closing cost

Type of transactions: Purchase and Refinance

Types of 203k loans: 203k Streamlined and 203k Standard

  • 203(k) Streamlined:  Streamline renovations do not allow for structural repairs and are limited to a total of $ 35,000.00 in hard and soft costs. There is no minimum dollar amount of streamlined loans, but repairs are limited to repair, replace, and update of items.                       
  • 203(k) Standard:   Loans with more than $ 35,000.00 in repairs and/or property repairs that require structural improvements are standard 203(k) product.  There is a minimum requirement of $5,000 in eligible improvements on the subject property. All standard 203K loans require the services of a consultant.

Borrowers can finance up to 6 months of mortgage payments. This is allowed ONLY when the property is vacant and the work is not completed. Also the property must be uninhabitable.

The 203(k) Streamlined program includes the following improvements and/or repairs:

  • Repair/Replacement of roofs, gutters and downspouts
  • Repair/Replacement/upgrade of existing HVAC systems
  • Repair/Replacement/upgrade of plumbing and electrical systems
  • Repair/Replacement of flooring 
  • Minor remodeling, such as kitchens, bathrooms, 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
  • Accessibility improvements for persons with disabilities
  • Lead-based paint stabilization or abatement of lead-based paint hazards 
  • Repair/replace/add 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

203(k) Standard program includes the following improvements and/or repairs:

  • Structural repairs and alterations – includes additions to the structure
  • Improvement in the functionality or modernization – includes updating kitchens and   bathrooms
  • Changes for aesthetic appeal and the elimination of obsolescence – new exterior siding and new doors, repair/replacement of plumbing, heat, air conditioning or electrical – installation of new plumbing fixtures are acceptable, including interior whirlpool bathtubs
  • Installation of well and/or septic system – must be installed or repaired prior to beginning any other repairs to the property
  • Replacement of flooring, carpeting or tile
  • Energy conservation improvement – new double pane windows and doors, storm windows, insulation, solar domestic hot water systems
  • Major landscape work and site improvement – patios and terraces that improve the value of the property equal to the cost, or that are needed to preserve the property from erosion. Tree removal is also acceptable if the tree presents a hazard to the occupants.
  • Purchase and installation of appliances, including freestanding ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
  • Accessibility improvements for accessibility for persons with disabilities
  • Painting and other cosmetic repairs
  • Repair of a swimming pool – must be less than $1,500

Ineligible work items
  • Items that will not become a permanent part of the property are not eligible
  • Luxury items are not eligible – Examples are: new swimming pools, exterior hot tubs, saunas, spas, tennis courts and barbecue pits
Before After

Before Residential Rehab Loans

After 203k FHA Rehab Loan

What are the lender’s requirements for examining the contractor bids? For paying the contractor prior to beginning construction? For inspections of the work?
  • Contractor bids:  While lenders are not contractors, participation in this program requires that they examine the contractor’s bid(s) and determine that they fall within the usual and customary range for similar work.  Lenders must also ensure that the selected contractor(s) meet all jurisdictional licensing and bonding requirements.
  • Payments in advance of construction:  The lender—at its discretion—may provide the contractor with up to 50 percent of the estimated cost of any work item prior to beginning construction.  Such payments will only be made where the lender is satisfied with the reputation of the contractor(s) and the contractor is not willing or able to defer receipt of payment until completion of the work or the payment represents the cost of materials incurred prior to construction.
  • Payments for Inspections
    • For repair costs not exceeding $15,000, the lender is not required to perform, or have others perform, inspections of the completed work. However, the lender may choose to obtain or perform inspections if it believes such actions are necessary for program compliance and/or risk mitigation.  Lenders may also ensure that the repairs and/or improvements have been completed by obtaining contractor’s receipts or by a signed Borrower’s Letter of Completion.  If the lender determines that an inspection(s) by a third party is necessary to ensure proper completion of the proposed repair or improvement item, the lender may charge the borrower for the costs of no more than two inspections per each contractor. 
    • For repairs in excess of $15,000, the lender must perform or obtain an inspection of the completed work by a third part.     
What are the borrower’s requirements for selecting the contractor?  And what are the lender’s requirements for review of the contractor and the rehabilitation proposal? 

The borrower must use one or more contractors to complete the repairs.  “Self-help” arrangements, in which the borrower performs the work, are not to be approved unless the borrower can sufficiently demonstrate that he or she has the necessary expertise and experience to perform the work competently (e.g., borrower is an electrician and will perform electrical repairs/upgrades to the property). 

The borrower will select the contractor(s) who will provide estimates for work to be done.  The lender reviews the borrower’s proposed work plan and cost estimates to ensure the planned work meets all program and repair recommendations as noted on the appraisal report.  The borrower must provide the lender with a written cost estimate(s) and references from a duly licensed and bonded contractor(s) for each specialized repair or improvement.  If “self-help” arrangements are utilized, the borrower must provide written estimates from the suppliers of the materials.  Those repairs and improvements must meet any local codes and ordinances and the borrower and/or contractor must obtain all required permits prior to the commencement of work.

The cost estimate(s) must clearly state the nature and type of repair and the cost for completion of the work item and must be made even if the borrower is performing some or all of the work under a self-help arrangement.  The lender must review the contractor’s credentials, work experience and client references and may require the borrower to provide additional cost estimates if necessary.  After review, the selected contractor(s) must agree in writing to complete the work for the amount of the cost estimate and within the allotted time frame.  The contractor must finish the work in accordance with the written estimate and Homeowner/Contractor Agreement and any approved change order.  As in the regular 203(k) program, the Rehabilitation Construction Period begins when the mortgage loan is closed. 

What are the lender’s requirements for paying contractors?

No more than two payments may be made to each contractor or to the borrower if the borrower is performing the work under a self-help arrangement.  The first payment is intended to defray material costs and shall not be more than 50% of the estimated costs of all repairs/improvements.  When permits are required, those fees may be reimbursed to the contractor at closing.  The final payment to the contractor will be made following completion of all work and release of any and all liens arising out of the contract or submission of receipts or other evidence of payment covering all subcontractors or suppliers who could file a legal claim.  When necessary, the lender may arrange a payment schedule, not to exceed two (2) releases, per specialized contractor (an initial release plus a final release.)  Lenders are to issue payments solely to the contractor, except if the borrower is performing the work under a self-help arrangement, in which case the borrower may be reimbursed for materials purchased in accordance with the previously obtained estimates; the borrower may not be compensated for his or her labor.   

To eliminate the need and cost for an inspection of the completed repair(s) or improvement(s) when not exceeding $15,000, the lender may accept receipts or proof of completion of the work to the homeowner’s satisfaction from the contractor.  Before a final release is made, the borrower must sign a statement acknowledging that the work has been completed in a professional and satisfactory manner.   

May the lender establish a Contingency Reserve?

The Streamlined (k) program does not mandate a contingency reserve be established.  However, at the lender’s discretion a contingency reserve account may be set up for administering the loan.  Funds held back in contingency reserve must be used solely to pay for the proposed repairs or improvements and any unforeseen items related to these repair items.  Any unspent funds remaining after the final work item payment(s) is made, must be applied to the mortgage principal.

Is there a maximum mortgage amount? 

The appraiser will provide an after-improved value since 110% of that amount is used in calculating the maximum mortgage. 

Is there any 203(k) program for a mixed use property?

Yes. A 203(k) mortgage may be originated on a "mixed use" residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.

Before After

After Residential Rehab Loans


Assume   Purchase Price of $ 125,000.00
Assume “After Improved” Value of $ 165,000.00
Total Cost of repairs:  
4 Inspections @ $100.00 each  
4 Title Updates @ $ 50.00 each  
Consultant Fee  
Building Permits  
Architect’s fee             
Assume Utilities are turned on (so 10% Contingency fee)  

To calculate the maximum mortgage amount:


$ 33,900.00


$   3,390.00

Inspection & Title fees

$      600.00


$ 37,890.00

Architect’s fee

$ 1,200.00

Consultant’s fee

$  700.00



$ 39,940.00 **

Supplemental Origination fee ( for Renovation ) This fee is greater of $350.00 or 1.5% of total ** 1.5% of 39,940.00 = 599.10

$  599.10

Now add $ 599.10. Supplemental 1.5% Renovation fee
To the cost of $ 39.940.00** Repairs, Contingency, and Inspection/title fees
Total   $ 40,539.10 Total Rehabilitation Costs


  $ 40,539.10 Total Rehabilitation Costs
  $ 125,000.00 Purchase Price
Total   $ 165,539.00  
Max Financing $ 165,539.00   x 96.5% = $ 159,745.14

3.5 % Minimum Investment from borrower à 3.5% of $ 165,539.99 = $ 5,793.87

Maximum financing of $ 159,745.14
Minimum Borrowers Investment of $ 5,793.87
$ 40,539.00 Total Escrowed Funds for Renovation

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