203k MADE EASY

Required Improvements

All rehabilitation construction and/or additions financed with Section 203(k) mortgage proceeds must comply with the following:

• Cost Effective Energy Conservation Standards
  
  
  1. Addition to existing structure. New construction must conform with local codes and HUD Minimum Property Standards in 24 CFR 200.926d.
     
     Rehabilitation of Existing Structure. To improve the thermal efficiency of the dwelling, the following are required:
     
     
     • Weatherstrip all doors and windows to reduce infiltration of air when existing weatherstripping is inadequate or nonexistent.
        
     • Caulk or seal all openings, cracks or joints in the building envelope to reduce air infiltration.
        
     • Insulate all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation. Insulate ceiling areas where necessary
        
     • Adequately ventilate attic and crawl space areas. For additional information and requirements, refer to 24 CFR Part 39.
        
  2. Replacement Systems
     
     
     • Heating, ventilating, and air conditioning system supply and return pipes and ducts must be insulated whenever they run through unconditioned spaces.
        
     • Heating systems, burners, and air conditioning systems must be carefully sized to be no greater than 15 percent oversized for the critical design, heating or cooling, except to satisfy the manufacturer's next closest nominal size.
        
• Smoke Detectors

  Each sleeping area must be provided with a minimum of one (1) approved, listed and labeled smoke detector installed adjacent to the sleeping area.

Items Eligible Under the 203(k) Program

The homeowner can use the 203(k) program for painting, room additions, decks, finishing a basement, and other items even if the home does not need any other improvements. It can also include the items shown in the FHA Streamlined 203(k).

Important: All health, safety and energy conservation items must be addressed first, after which you can include general home improvements.

Items NOT Eligible Under the 203(k) Program

Luxury items and improvements (such as swimming pools or spas) are not eligible as a cost of rehabilitation.

 

 

203(k) Quick Facts

One to Four Units

Eligible properties include one to four-family dwellings that have been completed for at least one year.

Monthly Payment Reserve

Up to 6 months of mortgage payments, including the mortgage insurance premium, may be placed in escrow to cover the monthly payments during the construcion period.

Foreclosed Properties

203(k) loans can be used to purchase and rehabilitate foreclosed properties that do not meet the regular FHA requirements

Refinancing

203(k) loans can be used to refinance and improve a property that is currently owned by the borrower.