FHA 203(k) Loans, or “Renovation Loans,” allow borrowers to finance costs associated with renovations within a single mortgage loan. They are specifically designed for borrowers who want to remodel or upgrade a home they currently live in, or a fixer-upper they wish to purchase. Rather than having to obtain a separate loan to finance the cost of repairs or rehabilitation, this mortgage loan option rolls it all into one.
There are two different FHA 203(k) programs: Standard and Limited.
The Standard 203(k) can be used to purchase or refinance a home that needs remodeling/structural repairs. The minimum rehabilitation cost for the Standard program is $5,000 and a consultant is required to oversee the project.
Standard 203(k) Overview:
- Structural changes and landscaping are allowed
- $5,000 renovation minimum
- Maximum completion time of 180 days (6 months)
The Limited 203(k) is used to purchase or refinance a home that needs minor remodeling and non-structural repairs. The repairs do not require a consultant or project minimum, but the repairs can not exceed $35,000.
Limited 203(k) Overview:
- Minor remodeling only
- $35,000 project maximum, no minimum
- No consultant required
- Maximum completion time of 90 days (3 months)
The 203(k) loan is an FHA-insured product which means that it features a mandatory monthly private mortgage insurance expense associated with it, along with an upfront mortgage funding fee.
If you are interested in an FHA 203(k) Loan and want to know if it’s right for you, give us a call at (760) 930-0569 and one of our loan officers will assist you.