FHA 203(k) Refinance Loans

What are FHA 203(k) loans for?

This kind of loan is a rehabilitation loan, intended to allow someone to refinance the mortgage on a home that needs repair or renovation. These loans are provided by Federal Housing Administration (FHA) approved lenders. The loans are insured by HUD, the U.S. Department of Housing and Urban Development.

What are the Benefits?

Home repairs can be very costly, quickly draining your savings or racking up debt. By contrast, an FHA 203(k) refinance finances repairs with a fixed or adjustable rate mortgage that very likely has lower interest than other forms of credit.

Renovations may also increase the future value of the home and make it more easily resaleable, if that is your wish.

Types of FHA 203(k) Refinance Loans

Limited 203(k)

This type of loan gives you fast access to funds, for less extensive repairs and renovations. There are no minimum loan amounts, and you can borrow up to a maximum of $35,000. Many types of repairs qualify for this program, ranging from: roof repair; repair of existing HVAC, plumbing and electrical systems; flooring; interior and exterior painting, and more. New construction and other major structural repairs are ineligible.

Standard 203(k)

This type of loan is for repairs of at least $5,000, but there is no maximum. A HUD representative will inspect the property, consult on the repairs and costs associated, and oversee the project. All repairs covered by Limited 203(k) loans are covered, as well as certain kinds of structural repair and new construction, update of kitchens and bathrooms (including appliances), remediation of safety hazards, and accessibility improvements for the handicapped.

Borrower Eligibility

Eligible Borrowers:

U.S. Citizens or permanent resident aliens

Ineligible Borrowers:

Foreign nationals, Corporations and LLCs

Property Eligibility

Eligible Properties:

1-to-4 unit attached/detached single family residences and planned unit developments
FHA-approved condos
Modular homes (must have a permanent foundation)
Mixed-use developments (additional conditions apply)

Ineligible Properties:

Co-ops
New construction
Manufactured houses
Properties with non-conforming construction that can’t be remedied

Other Requirements and Repair Eligibility

In order to be eligible, the subject property must be owner-occupied (more simply, this cannot be a second home or an investment property). Additional appraisal and construction requirements may need to be met.

Eligible Major Structural Repairs:

Structural alterations
New bathrooms
Finishing of attics/basements
Repair of termite damage
Repair of detached garages
Construction of new attached garage
Chimneys/skylights
Update of kitchens/bathrooms
Remediation of safety hazards
HVAC repair or replacement
Electrical and plumbing improvements
Grading and drainage improvement
Major landscaping improvement
Swimming pool repair (minimum cost $1,500)

Eligible Non-Structural Repairs:

Roofs
Gutters and downspouts
Decks, patios, and porches
Repair of existing HVAC
Plumbing/electrical
Flooring and carpeting
Interior and exterior painting
Purchase and installation of appliances
Accessibility improvements for the handicapped
Non-structural basement finishing and waterproofing
Weatherization improvements
Replacement of windows/doors
Residing
Septic/wells

What information do I need to provide for refinancing?

Proof of income
Provide copies of several of two most recent pay stubs. For self-employed borrowers, you may also provide profit and loss statements.
Tax Information
Tax returns, W-2s and 1099s for the past two years. If you are self-employed you will also need to provide your 1099-MISC.

Assets Information

Two most recent bank statements, all pages

Credit Info

A credit check will be conducted when you apply

Debt documentation

Provide documentation that details your financial commitments, including your current mortgage, car loans, and other debts.