- rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes;
- rehabilitate such a Structure and refinance outstanding indebtedness on the Structure and the Real Property on which the Structure is located;
- purchase and rehabilitate a Structure and purchase the Real Property on which the Structure is located; or
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rehabilitate the interior space of an eligible Condominium Unit excluding any areas that are the responsibility of the Condominium Association.
The total mortgage amount on the Property, including the cost of the repairs, must fall within the FHA mortgage limit for the area.
A portion of the loan proceeds is set aside in an escrow account and released as rehabilitation is completed. The extent of the rehabilitation covered by Section 203(k) financing may range from relatively minor to near total reconstruction. Ineligible uses of a 203(k) loan include luxury items, improvements that do not become a permanent part of the Property, and additions or alterations to support commercial use or to equip or refurbish space for commercial use
There are two types of 203(k) rehabilitation mortgages: Standard 203(k) and Limited 203(k).
The Standard 203(k) mortgage may be used for remodeling and repairs. There is a minimum repair cost of $5,000 and the use of a 203(k) Consultant is required.
The Limited 203(k) may only be used for minor remodeling and non-structural repairs. The Limited 203(k) does not require the use of a 203(k) Consultant. The total rehabilitation cost must not exceed $35,000, or $50,000 if the Property is one of the first 15,000 mortgages secured by Properties in Qualified Opportunity Zones (QOZ) during each calendar year through December 31, 2028. There is no minimum rehabilitation cost. A list of QOZs is available from the Treasury Department’s Community Development Financial Institutions Fund.
To apply for a 203(k) Rehabilitation Mortgage, please contact an FHA-approved lender. To find an FHA-approved lender in your area visit the following HUD website:
https://www.hud.gov/program_offices/housing/sfh/lender/lenderlist
Contact the listed lenders to confirm their participation in specific HUD/FHA programs. You can also find lenders in your area using your local telephone directory under the heading “Mortgages”.
Find out more about the 203(k) program by visiting HUD's 203(k) Rehabilitation Mortgage Insurance web page at https://www.hud.gov/program_offices/housing/sfh/203k/
For FHA Policy information see FHA’s Single Family Housing Policy Handbook 4000.1 Section II.A.8.a.i. at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh