203K IMPROVEMENTS THAT ARE ALLOWED – FHA 203k Home Loan

home improvement loans mentioned above, the Limited 203k and Standard 203k programs cover two general project scopes. The Limited 203k is meant for smaller repairs and improvements. The Standard 203k is meant for structural improvements including complete home reconstruction from a demolished or razed building (provided the complete and original foundation system remains). If the home is torn down all the way to the footings, you can’t use a Standard FHA 203k home improvement loan but instead could be qualified for an FHA 203(b) which is meant for new construction.

Standard 203k Projects

Here are some examples of larger projects allowed under the Standard FHA 203 program:

  • Room additions
  • Major energy conservation improvements
  • Floor treatments
  • Free-standing appliances
  • Add heating/cooling systems
  • Plumbing
  • Roofing
  • Septic
  • Moving a house
  • Add a storm shelter
  • Structural Work
  • Wells
  • Repairs over $35,000

There are a couple of additional Standard 203k requirements to know about.

First, properties must meet certain energy efficiency and structural standards and comply with home improvement loan building codes. All FHA minimum property standards must be met. Improvements must include weather stripping, insulation, and other thermal efficient measures. Adequate safety measures must be met such as working smoke detectors and fixing peeling paint.

Second, for Standard 203k loans, an FHA-approved 203k Consultant will oversee and inspect the rehab efforts from start to finish. Here are some things you’ll want to know about Consultants, they are:

Selected by the lender

Enter into a written agreement with the borrower which outlines fees ($400 to $1000) and duties

Prepare cost estimates for the improvements and/or repairs

Reviews plots if there are additions, floor plans, cabinetry, elevation, grading, and drainage plans

Inspect home at each work milestone so that draws from the escrow account may be released

Complete a final inspection of the home

Limited 203k Projects

Here are some examples of smaller, more “cosmetic” projects that can be financed with a Limited 203k:

  • Replace cabinets
  • Interior or exterior painting
  • Improve accessibility for people with disabilities
  • Add major appliances (dishwashers, free-standing ranges, refrigerators, etc.)
  • Repair or replace existing flooring and carpeting
  • Lead-based paint abatement
  • Minor remodeling (non-structural)
  • Repair or replace existing HVAC systems, heating, plumbing, and electrical systems
  • Repair roof, gutters, and downspouts
  • Repair decks, patios or porches
  • Repair septic systems

Weatherization

Major rehabilitation, like relocating a load-bearing wall, is not allowed with a Limited 203k. Nor could you add new rooms or repair major structural damage. To summarize, bigger projects are better-suited for the Standard 203k.

203K IMPROVEMENTS THAT ARE NOT ALLOWED

Neither the Standard nor the Limited programs may be used for the following:

  • Satellite dishes or TV antennas
  • Alterations or additions for commercial use
  • Outdoor barbecue pits or fireplaces
  • Landscaping or Fencing
  • Swimming pools (although you can fill one in for health and safety issues)
  • ELIGIBLE PROPERTIES FOR FHA 203K home improvement loan
  • The property and dwelling must meet the following criteria:
  • Owner-occupied (you gotta actually live there)

1 to 4-unit family dwelling, completed for at least one year (with Certificate of Occupancy), unfinished homes do not qualify.