There are certain improvements that are eligible for the HUD 203K Loan.
Eligible improvements for HUD 203K type loans do not include luxury items and improvements that do not become a
permanent part of the real property.
However, the homeowner can use the 203(k) rehab program to finance such items as painting, room additions, decks
and other items even if the home does not need any other improvements.
What Eligible Improvements Are Acceptable For
AFHA 203K Mortgage ?
1. Structural improvements and reconstruction. Examples would be
repairs to the foundation, basement, finished attics, and termite damage.
2. Changes for improved functions and modernization. Examples would be remodeled bathrooms, kitchens, new
appliances.
3. Elimination of health and safety hazards. Examples would be removal of mold, lead-based paint.
4. Changes for aesthetic appeal and elimination of obsolescence. New exterior siding, adding a second story,
covered porch.
5. Reconditioning or replacement of plumbing, heating, air conditioning and electrical systems. Even whirlpool
bathtubs are included in 203K rehab loan.
6. Installation of well and septic system. There are restrictions on where you can put a well and septic
system.
7. Roofing, gutters and downspouts are also eligible for HUD 203K.
8. Flooring, tiling and carpeting.
9. Energy conservation improvements such as new double pane windows, insulation, solar hot water systems,
caulking and weather stripping.
10. Major landscape work and site improvements. Even decks and patios are eligible for HUD 203K.
11. Improvements for accessibility to disabled.
12. A new garage as long it is attached to the property.
As you can see pretty much everything is included in the HUD 203K.
There are certain required improvements that will have to be made if you are planning on using a FHA 203K Mortgage to buy and rehab a home.
Required Improvements For HUD 203K
Loans
A. Cost Effective Energy Conservation Standards
1. Any new addition to existing structure has to conform with all of the local building codes and also HUD
Minimum Property Standards.
2. The rehabilitation of an existing structure will have to improve the thermal efficiency of the home. Ways you
can do that is by installing weather-stripping on all of the doors and windows, caulking and sealing, insulating
all openings in exterior walls, and providing adequate ventilation in the attic and crawl spaces.
3. Make sure the heating and air conditioning systems are insulated and are of the proper size.
B. Smoke Detectors - A smoke detector must be in each sleeping area that is installed adjacent to the
sleeping area.
There is a time period for doing the improvements for the 203K rehab. The work has to begin within 30 days of
execution of the Rehabilitation Agreement. The work must not stop for more than 30 consecutive days. The work has
to be completed within 6 months.
The cost of the repairs cannot increases during the construction period more than what the approved 203K rehab
loan amount. It is very important in the beginning to get a general contractor who will accurately estimate the
cost of the improvements for the HUD 203K.
Investors can not use the 203K rehab loan program. The HUD 203K program is
for only homeowners using FHA insured financing.
