May 10, 2017
In our previous blog post, we discussed the idea that an FHA 203(k) rehab loan could be used to purchase and modify a property to meet FHA requirements for properties to be no more than four units.
In HUD 4000.1, under the list of eligible improvements, we learn that “decreasing an existing multi-unit Structure to a one- to four-family Structure” is one of those approved uses of the loan.
But what are the other uses? In the original blog post we had a partial list, but there is a complete (at the time of this writing) list of what is considered an eligible use of FHA 203(k) rehab loan funds. The FHA loan rule book states that the improvements on this list is not exhaustive and that what you see below is an “including, but not limited to” type of list.
Borrowers who are interested in applying for an FHA 203(k) rehab loan for any of the uses below will be required to financially qualify the same as with any other FHA mortgage. Due to the more complex nature of FHA 203(k) rehab loans, special FHA requirements or lender rules on escrow, time limits on rehab project completion, inspections, and other factors may apply.
Here is the entire list of eligible FHA 203(k) Standard Rehab Loan 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, 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 HUDs 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 (24 CFR 200.805 and 200.810(c)) and the U.S. Environmental Protection Agencies (EPA) Renovation, Repair, and Painting Rule (40 CFR 745, especially subparts E and Q).
Speak to a loan officer to learn more about how FHA 203(k) rehab loans work and what your options might be under the program.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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