FHA 203K Guidelines

1. REO properties, one to four-unit homes, condos, and PUDs are eligible as long as they are a primary residence.
2. Minimum renovations are $5000.
3. Maximum renovations without an FHA HUD-approved consultant are $35,000.
4. Maximum renovations with an FHA HUD-approved consultant can be up to 110% of appraised value [(purchase cost + renovations costs) <= (as repaired appraised value * 1.10)].
5. Maximum Mortgage Calculation is defined as the lesser of:
• The as-is value of the property before rehabilitation plus the cost of rehabilitation; or
• 110 percent of the expected market value of the property upon completion of the work.
6. If renovations are over $35,000, an FHA HUD-approved consultant must come out and inspect the property to make sure repairs and construction are made to FHA standards. Click here to find an FHA HUD-approved consultant in your area.
7. Luxury items and improvements that do not become a permanent part of the real property are not eligible as a cost of rehabilitation.
8. Purchase down payment is 3.5% of the accepted sales price of the property and 100% financing on all other costs.
9. Lender handles rehabilitation work draws from an escrow account – up to 5 releases allowed. Each draw is post a HUD-approved fee inspector’s inspection of work.
10. The mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.
11. Work must be completed within agreed upon time frame (no more than six months after closing)
12. Up to six months PITI can be included in the mortgage if the property is not occupied during construction.
13. Loan process prior to start of work takes about 60 days.
14. Interest rate is between 5.250% and 5.875%. A streamline refinance will lower the borrower’s interest rate and payment several months after closing.

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