Eligible Improvements for HUD 203K

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. There is a minimum $5,000 requirement for the eligible improvements on the existing property.

What Eligible Improvements are acceptable for the HUD 203K?

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 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.

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