203(k) Rehabilitation Mortgage Insurance Program Types
Limited 203(k) Mortgage
- Permits homebuyers and homeowners to finance up to $75,000 into their mortgage to repair, improve, or upgrade their home.
- Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or an FHA appraiser.
- Homeowners can make minor remodeling and non-structural repairs, improvements, or prepare their home for sale.
- Homebuyers can make their new home move-in ready by remodeling the kitchen, painting the interior, or purchasing new carpet.
Standard 203(k) Mortgage
- Available to homebuyers and homeowners for the major rehabilitation and repair of single-family properties.
- The cost of the rehabilitation must be at least $5,000 but the total value of the property must still fall within the FHA mortgage limit for the area.
- Supports major renovations and structural additions and when applied broadly, helps strengthen the housing stock, revitalize neighborhood and to expand homeownership opportunities.
Stages in the Process
Origination Stage
- Borrower owns or finds a property that requires rehabilitation.
- Borrower talks to an FHA-approved lender and selects FHA 203(k) program.
- Lender selects a 203(k) HUD-approved consultant from the roster. This step is optional for the Limited 203(k) Mortgage.
- Consultant visits the home with borrower and prepares a work write-up and cost estimate.
- Work write-up and bids are provided to the lender.
- Lender processes, underwrites, closes, and funds the transaction.
- Lender submits the loan for endorsement and FHA insures the loan.
- Improvements can begin.
Repair/Improvements Stage
- Contractor obtains necessary permits prior to the start of the project.
- Contractor completes the first phase of the project.
- Borrower contacts the 203(k) consultant to request an inspection for draw release.
- Consultant and borrower inspect the work and consultant certifies work is satisfactory.
- Consultant and borrower sign the draw release and submit to lender for payment.
- Lender issues a two-party check made payable to borrower and contractor.
- This process continues until all work is completed.
Project Completion Stage
- Borrower provides a release letter indicating all work is completed.
- Consultant verifies completion.
- Consultant obtains certificate of occupancy or building permit close-out approval if applicable.
- Remaining escrow funds are released.
- Lender is responsible for closing out the entire project on the Escrow Close-Out Screen in FHA Connection.