FHA 203(k) Refinance Loans
What are FHA 203(k) loans for?
This kind of loan is a rehabilitation loan, intended to allow someone to refinance the mortgage on a home that needs repair or renovation. These loans are provided by Federal Housing Administration (FHA) approved lenders. The loans are insured by HUD, the U.S. Department of Housing and Urban Development.
Benefits of FHA 203(k) Refinance Loans
Home repairs can be expensive and can deplete savings or lead to high-interest debt. The FHA 203(k) refinance offers a way to finance repairs through a fixed or adjustable-rate mortgage, likely at a lower interest rate than other forms of credit, such as credit cards or personal loans.
Additionally, the renovations funded by the loan could potentially increase the home's future value, making it more marketable and easier to sell should you choose to do so.
Types of FHA 203(k) Refinance Loans
Limited 203(k)
- Ideal for less extensive repairs and renovations.
- No minimum loan amounts, with a maximum of $35,000 available.
- Repairs eligible for this program include:
- Roof repairs
- HVAC, plumbing, and electrical system repairs
- Flooring and interior/exterior painting
- Major structural repairs and new construction are not eligible.
Standard 203(k)
- For more significant repairs, with a minimum of $5,000 in repairs required, and no upper limit on the loan amount.
- A HUD representative will inspect and supervise the project.
- Covers all repairs allowed under Limited 203(k), as well as:
- Structural repairs and new construction
- Kitchen and bathroom renovations, including appliances
- Safety hazard remediation
- Accessibility improvements for individuals with disabilities
Eligible Borrowers:
- U.S. Citizens or permanent resident aliens
Ineligible Borrowers:
- Foreign nationals, Corporations and LLCs
Property Eligibility
Eligible Properties:
- 1-to-4 unit attached/detached single family residences and planned unit developments
- FHA-approved condos
- Modular homes (must have a permanent foundation)
- Mixed-use developments (additional conditions apply)
Ineligible Properties:
- Co-ops
- New construction
- Manufactured houses
- Properties with non-conforming construction that can’t be remedied
Other Requirements and Repair Eligibility
In order to be eligible, the subject property must be owner-occupied (more simply, this cannot be a second home or an investment property). Additional appraisal and construction requirements may need to be met.
Eligible Major Structural Repairs:
- Structural alterations
- New bathrooms
- Finishing of attics/basements
- Repair of termite damage
- Repair of detached garages
- Construction of new attached garage
- Chimneys/skylights
- Update of kitchens/bathrooms
- Remediation of safety hazards
- HVAC repair or replacement
- Electrical and plumbing improvements
- Grading and drainage improvement
- Major landscaping improvement
- Swimming pool repair (minimum cost $1,500)
Eligible Non-Structural Repairs:
- Roofs
- Gutters and downspouts
- Decks, patios, and porches
- Repair of existing HVAC
- Plumbing/electrical
- Flooring and carpeting
- Interior and exterior painting
- Purchase and installation of appliances
- Accessibility improvements for the handicapped
- Non-structural basement finishing and waterproofing
- Weatherization improvements
- Replacement of windows/doors
- Residing
- Septic/wells
What information do I need to provide for refinancing?
- Proof of income
- Provide copies of several of two most recent pay stubs. For self-employed borrowers, you may also provide profit and loss statements.
- Tax Information
- Tax returns, W-2s and 1099s for the past two years. If you are self-employed you will also need to provide your 1099-MISC.
Assets Information, Two most recent bank statements, all pages
Credit Info
- A credit check will be conducted when you apply
Debt documentation
- Provide documentation that details your financial commitments, including your current mortgage, car loans, and other debts.