As 203(k) renovation mortgages gain in popularity, many of you have recently asked me whether cosmetic repairs and upgrades are eligible.
While there are limitations to the things you can do with a 203(k) renovation loan, they are small when you consider what your clients CAN do!
The FHA 203(k) loan was designed to rehabilitate a home that has safety and soundness defects such as unsafe electrical wiring or a failed roof. However, it also allows the homeowner to make many wonderful improvements to the home, such as renovate an outdated kitchen, install central air conditioning, add a bathroom or even create additional square footage and living space.
A 203(k) loan will allow the homeowner to perform desired improvements to a property up to 10% over the after-repaired appraised value of the home. So no, unfortunately, it will not cover the addition of a new swimming pool, however it will allow repairs to an existing pool structure up to a specific amount.
As an FHA-Certified consultant, one of my roles is to inspect a property and determine which repairs are mandatory (necessary to reach FHA Minimum Property Standards), recommended (for example, replace older, poorly functioning windows) and desired (cosmetic or other upgrades). From there, I assist the homeowners and their mortgage professional with every remaining step in the process.
The 203(k) loan is able to be used for any property up to a four-family dwelling. The loan holder must occupy the property, but in the case of a multi-family dwelling, the borrower can use the other units for tenants.
Call us at 301-685-3145 to schedule a 203(k) consultation or to ask questions about the process.