Some examples of what cannot be done under a Limited 203(k), thus requiring a Full 203(k) loan are:
– Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall;
– New construction (including room additions);
– Repair of structural damage;
– Repairs requiring detailed drawings or architectural exhibits;
– Landscaping or similar site amenity improvements;
– Any repair or improvement requiring a work schedule longer than six (6) months; or
– Rehabilitation activities that require more than two (2) payments per specialized contractor.
A full 203(k) loan allows you to do the following as well:
– Structural repairs and alterations
– Room additions and garages
– Full renovations of kitchens and bath
– Repair and replacement of plumbing, heating, air-conditioning or electrical systems
– Energy conservation improvements
– Installation or repairs on a well or septic system
– Major landscape and site improvements for drainage
– Patios, decks, fencing, driveways, and improvements for accessibility for the handicapped
– Changes for aesthetic appeal and elimination of obsolescence, painting and cosmetic repairs
– New siding, exterior doors, Thermo-pane windows and storm doors
– Replacement of flooring, tile or carpeting
– New appliances
To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.
Homes that have been demolished, or will be razed as part of the rehabilitation work, are eligible provided the existing foundation system remains in place.
In addition to typical home rehabilitation projects, this program can be used to convert a one-family dwelling to a two-, three-, or four-family dwelling. An existing multiunit dwelling could be decreased to a one- to four-family unit.
An existing house (or modular unit) on another site can be moved onto the mortgaged property; however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation.
A 203(k) mortgage may be originated on a “mixed use” residential property provided: (1) The property has no greater than 25 percent (for a one story building); 33 percent (for a three story building); and 49 percent (for a two story building) of its floor area used for commercial (storefront) purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling and areas used to access the residential part of the property.
So, by now you are probably ready to go and wondering what the next step is. For more information on the 203(k) program, you can check out HUD’s website. You can also give us a call at 210-202-1974 and we will go over everything with you and get you on your way to turning the house you like into the home you love.
Fannie Mae HomeStyle®
The Fannie Mae HomeStyle® mortgage is similar to the FHA 203(k) loan, but has different limits on the After Repair Value. These loans can be used on a wider variety of homes though, and they don’t have to be owner occupied (One- to four-unit principal residences, one-unit second homes, or one-unit investor properties including units in condos, co-ops, and PUDs. No
manufactured housing.) It can be used for both purchase and refinance loans to renovate a property. Being a type of construction loan, a consultant is still needed for the initial work write-up and draw inspections. Veteran Home Inspections can help you with all of these steps and help guide you through the process.