The Federal Housing Administration or commonly referred to as FHA was formed over 80 years ago. The primary mission of the FHA is to make owning a home affordable.
One of the FHA’s loans is a fixer upper loan called the 203k.
This loan is available for both purchasing a home as well as refinancing a home.
The 203k loan has to different programs. The first is called a Standard 203k loan. This loan is used in cases where more complex renovation is needed. The FHA has a list of repairs or renovations that may fall under one of the two 203k loan programs. The partial list below of renovations that would require a standard 203k loan would be..
New Room Additions
Moving And Relocating Load Bearing Walls
Repairing Structural Damage To A House
Total Repairs To A House Exceeding $35,000
For more minor renovations and repairs the FHA has a program called a Streamlined 203k loan. This program will require less paperwork and is quite a bit easier to complete the process. Below is a list of eligible improvements..
Repairs or replacement of roofs, gutters and down spouts
Repair, replacement or upgrading existing HVAC systems
Repair, replace or upgrade existing plumbing and electrical systems
Repair or replace flooring
Minor renovations such as kitchens as long as it doesn’t require
Exterior and interior painting
Weatherization including storm doors and windows, insulation and weather stripping
Purchase and installation of appliances such as refrigerators, stoves, washer and dryers.
Accessibility improvements for disabled persons
Lead based paint stabilization or abatement of lead based paint hazards
Repair, replace, or add, exterior decks, porches or patios
Basement remodeling and refinishing that don’t require structural repairs
Window and door replacement or repairs and exterior wall re-siding
Septic system and or well repairs and replacement
After applying for a 203k loan the mortgage company would look at the plans and specs of the improvements and give to an appraiser who would determine what the value is, based on the renovations being completed.
As long as the value after repairs falls under the allowed guidelines of FHA then the loan can go further in the processing department.
It will be up to the contractor completing the work to fill out the proper forms FHA requires for the 203k loan.
After the loan is approved for the closing it will go to the closing department and the closing documents will be prepared for closing of the loan.
After closing the loan the contractor will complete the work within the stated period of time. It will be the contractors responsibility to fund the costs of the repairs until completion.
Upon completion the appraiser will be required to return to the house for a re-inspection to determine if the repairs have been completed according to the original plans. If so the mortgage company will then release the money owed to the contractor for the work completed.
You can find our FAQ about FHA mortgages page here.
Purchase Or Refinance?
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Mortgage One has a long history of originating FHA loans in Michigan. For over 20 years we have provided Michigan residents with mortgage financing to help fulfill the american dream of home ownership.
FHA Mortgages are one of the easiest ways to qualify for a mortgage especially for a first time home buyer. This site will guide you through what it takes to qualify for a mortgage, from credit, income,and mortgage insurance. We are here to answer your questions and to help you close your loan in as little as 3 weeks.
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A few examples of what you
can do with a FHA 203k Loan