~ Standard & Limited 203(k) Eligible / Ineligible Improvements – Effective 9/14/2015

You will find a more inclusive list of eligible repairs under the FHA 203K renovation loan with the update taking affect on 9/14/2015 – the major update is that POOL repairs can now be included in a renovation budget (the cap used to be $1500 in total repairs) – YAY

Standard (Consultant) 203(k) Eligible Improvements include, but are not limited to:

  • Converting a one-family Structure to a two-, three- or four-family Structure;
  • Decreasing an existing multi-unit Structure to a one- to four-family Structure;
  • Reconstructing a Structure that has been or will be demolished, provided the complete existing foundation system is not affected and will still be used;
  • Repairing, reconstructing or elevating an existing foundation where the Structure will not be demolished;
  • Purchasing an existing Structure on another site, moving it onto a new foundation and repairing/renovating it;
  • Making structural alterations such as the repair or replacement of structural damage, additions to the Structure, and finished attics and/or basements;
  • Rehabilitating, improving or constructing a garage;
  • Eliminating health and safety hazards that would violate HUD’s Minimum Property Requirements (MPR);
  • Installing or repairing wells and/or septic systems;
  • Connecting to public water and sewage systems;
  • Repairing/replacing plumbing, heating, AC and electrical systems;
  • Making changes for improved functions and modernization;
  • Making changes for aesthetic appeal;
  • Repairing or adding roofing, gutters and downspouts;
  • Making energy conservation improvements;
  • Creating accessibility for persons with disabilities;
  • Installing or repairing fences, walkways, and driveways;
  • Installing a new refrigerator, cooktop, oven, dishwasher, built-in microwave oven, and washer/dryer;
  • Repairing or removing an in-ground swimming pool;
  • Installing smoke detectors;
  • Making site improvements;
  • Landscaping;
  • Installing or repairing exterior decks, patios, and porches;
  • Constructing a windstorm shelter; and
  • Covering lead-based paint stabilization costs, if the Structure was built before 1978, in accordance with the Single Family mortgage insurance lead-based paint rule and the U.S. Environmental Protection Agency’s (EPA)

Improvements Standards

  •  General Improvement Standards – All improvements to existing Structures must comply with HUD’s MPR. For a newly constructed addition to the existing Structure, the energy improvements must meet or exceed local codes and the requirements of the 2006 International Energy Conservation Code (IECC) or a successor energy code standard that has been adopted by HUD through a Federal Register notice.
  • Specific Improvement Standards – Any addition of a Structure unit must be attached to the existing Structure. Site improvements, landscaping, patios, decks and terraces must increase the As-Is Property Value equal to the dollar amount spent on the improvements or be necessary to preserve the Property from erosion.

Standard 203(k) Ineligible Improvements/Repairs

The 203(k) mortgage proceeds may not be used to finance costs associated with the purchase or repair of any luxury item, any improvement that does not become a permanent part of the subject Property, or improvements that solely benefit commercial functions within the Property, including:

  • Recreational or luxury improvements, such as:
    • swimming pools (existing swimming pools can be repaired)
    • an exterior hot tub, spa, whirlpool bath, or sauna
    • barbecue pits, outdoor fireplaces or hearths
    • bath houses
    • tennis courts
    • satellite dishes
    • tree surgery (except when eliminating an endangerment to existing
    • improvements)
    • photo murals
    • gazebos; or
  • Additions or alterations to support commercial use or to equip or refurbish space for commercial use.

Limited 203(k) Eligible Improvements include, but are not limited to:

  • Eliminating health and safety hazards that would violate HUD’s MPR;
  • Repairing or replacing wells and/or septic systems;
  • Connecting to public water and sewage systems;
  • Repairing/replacing plumbing, heating, AC and electrical systems;
  • Making changes for improved functions and modernization;
  • Eliminating obsolescence;
  • Repairing or installing new roofing, provided the structural integrity of the Structure will not be impacted by the work being performed; siding; gutters; and downspouts;
  • Making energy conservation improvements;
  • Creating accessibility for persons with disabilities;
  • Installing or repairing fences, walkways, and driveways;
  • Installing a new refrigerator, cooktop, oven, dishwasher, built-in microwave oven and washer/dryer;
  • Repairing or removing an in-ground swimming pool;
  • Installing smoke detectors;
  • Installing, replacing or repairing exterior decks, patios, and porches; and
  • Covering lead-based paint stabilization costs if the Structure was built before 1978

Limited 203(k) Ineligible Improvements/Repairs

The Limited 203(k) may only be used for minor remodeling and non-structural
repairs. The total rehabilitation cost may not exceed $35,000. There is no minimum repair cost.

The Limited 203(k) mortgage proceeds may not be used to finance major rehabilitation or major remodeling. FHA considers a repair to be “major” when any of the following are applicable:

  • the repair or improvements are expected to require more than six months to complete;
  • the rehabilitation activities require more than two payments per specialized contractor;
  • the required repairs arising from the appraisal:
    • necessitate a Consultant to develop a specification of repairs/Work Write-Up; or
    • require plans or architectural exhibits; or
  • the repair prevents the Borrower from occupying the Property for more than 15 Days during the rehabilitation period.

Additionally, the Limited 203(k) mortgage proceeds may not be used to finance the following specific repairs:

  • converting a one-family Structure to a two-, three- or four-family Structure;
  • decreasing an existing multi-unit Structure to a one- to four-family Structure;
  • reconstructing a Structure that has been or will be demolished;
  • repairing, reconstructing or elevating an existing foundation;
  • purchasing an existing Structure on another site and moving it onto a new foundation;
  • Making structural alterations such as the repair of structural damage and new construction, including room additions;
  • Landscaping and site improvements;
  • Constructing a windstorm shelter;
  • Making additions or alterations to support commercial use or to equip or refurbish space for commercial use; and/or
  • Making recreational or luxury improvements, such as:
    • new swimming pools;
    • an exterior hot tub, spa, whirlpool bath, or sauna;
    • barbecue pits, outdoor fireplaces or hearths;
    • bath houses;
    • tennis courts;
    • satellite dishes;
    • tree surgery (except when eliminating an endangerment to existing improvements);
    • photo murals; or
    • gazebos.

Call me today to discuss your Renovation Loan Options at 916-235-3989 – I have been helping clients with mortgage loan needs since 1999 and I specialize in FHA 203K Renovation Loans in California! (Read More about Sheri here)

Sheri McLaughlin – NMLS#448414

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