The Standard 203k was created specifically for projects that warrant extensive work or repairs, projects that will take longer than six months to complete, or when rehab costs will exceed $35,000. Additionally, Standard 203k loans have no maximum repair amount.
The Standard (k) loan option must be used when a property requires (or the borrower requests) structural work, such as a room addition or the removal or relocation of an interior or exterior wall.
Basics of a Full FHA 203k Rehab Loan
A Standard 203k is also used if the project requires engineering or exterior grading or inspections. The Standard 203k must be used if the renovation work will prohibit the homeowner from occupying the residence during the process.
If the home is considered uninhabitable, up to six months of mortgage payments can be financed to cover monthly loan payments during the renovation process and help the homeowner pay for alternate housing during construction.
On a Standard 203k loan, FHA requires that an FHA-designated Consultant create and document a work plan before they will approve the loan.
Borrowers who choose the full standard 203k will partner up with a HUD Certified Consultant on their loan. The 203k Consultant’s job is to provide value and protection during the 203k renovation, and is tasked with protecting the homeowner and ensuring that the renovation is completed according to the homeowner’s wishes.
Although the Consultant can be a vital resource, especially for first-time buyers or renovators, they are not created equally, and the homeowner must choose wisely. An experienced 203k Renovation Loan Officer who works with a roster of excellent Consultants will be able to make arrangements or recommendations about the appropriate Consultant-homeowner partnership for you.
The Consultant’s job is to ensure that the work meets FHA and local building code requirements.
The maximum mortgage amount allowed for a standard 203k is based on whichever is less:
- The as-is value of the property plus the costs of repair and rehabilitation.
- 110% of the projected value of the renovated property.
All 203k programs allow borrowers to finance the purchase price of the property, the closing costs, plus the cost of repairs.
Did You Know?
A rehab loan can be used for a purchase or refinance, and you do not have to be a first-time homebuyer to use it. Contact Us today at (888) 450-9639 to see how a 203k loan can increase the value of your property.