FHA 203 (K) Rehab Renovation Loan Cape Coral, Fort Myers, Punta Gorda

The FHA 203 (k) rehab loan, also referred to as a home renovation loan, enables homebuyers and homeowners to finance both the purchase or refinance along with the renovation of a home through a single mortgage.

FHA 203 K Rehab Renovation Loan Highlights!

  • Repair or renovation costs up to $35,000
  • Can be used for a purchase or refinance

FHA 203 K Rehab Renovation Loan Repairs-Replacements Allowed

  • Roofs & Gutters
  • Appliances, Washer/Dryers
  • Dish Washer, Microwave Ovens
  • Flooring
  • Heating and air conditioning
  • Plumbing & Electrical systems
  • Kitchen & Bath remodeling
  • Painting both interior & exterior
  • Windows & Doors
  • Septic system
  • Patios & porches
  • Minor Pool Repairs up to $1500.00

The FHA 203 K Rehab Renovation Loan does have some additional closing costs.

  • Inspection fee $175.00
  • Title policy update $150.00

What is the maximum repair costs Florida FHA 203 K Rehab Renovation Loan?

Given the need for homeowners to make minor repairs without exhausting personal savings, and in consideration of the increasing cost of materials, The limit is now raised to $35,000.

Can the Streamlined (k) program be used for refinancing the mortgage? 

The Streamlined (k) program is also available for a mortgage to refinance transactions, including those where the property is owned free-and-clear. Only credit-qualifying “no cash-out” refinance transactions with an appraisal are eligible for the Streamlined (k) program. The form HUD-92700 provides instructions for calculating the maximum mortgage permitted for Streamlined (k) loans for purchase and refinance transactions.

If the borrower has owned the property for less than a year, the acquisition cost must be used to determine the maximum mortgage amount. The requirement to use the lowest sales price within the last year does not apply to the Streamlined (k) program.

What are the appraisal requirements under the Streamlined (k) program?

The Streamlined (k) program may be used for discretionary repairs and/or improvements that may not have been identified in the course of a pre-purchase inspection or appraisal. The mortgagee must provide the appraiser with information regarding the proposed rehabilitation or improvements and all cost estimates so that an after-improved value can be estimated. A description of the proposed repairs and/or improvement must be included in the appraisal report as well as the contractor’s cost estimate. The appraiser is to indicate in the reconciliation section of the appraisal report an after-improved value subject to completion of the proposed repairs and/or improvements.

What are the mortgagee’s requirements for examining the contractor bids? For paying the contractor prior to beginning construction? For inspections of the work?

Contractor bids: While mortgagees are not contractors, participation in this program requires that they examine the contractor’s bid(s) and determine that they fall within the usual and customary range for similar work. Mortgagees must also ensure that the selected contractor(s) meet all jurisdictional licensing and bonding requirements.

Payments in advance of construction: The mortgagee—at its discretion—may provide the contractor with up to 50 percent of the estimated cost of any work item prior to beginning construction. Such payments should only be made where the mortgagee is satisfied with the reputation of the contractor(s), and the contractor is not willing or able to defer receipt of payment until completion of the work or the payment represents the cost of materials incurred prior to construction.

The cost estimate(s) must clearly state the nature and type of repair and the cost for completion of the work item and must be made even if the mortgagor is performing some or all of the work under a self-help arrangement. The mortgagee must review the contractor’s credentials, work experience, and client references and may require the mortgagor to provide additional cost estimates if necessary. After review, the selected contractor(s) must agree in writing to complete the work for the amount of the cost estimate and within the allotted time frame. A copy of the contractor’s cost estimate(s) and the Homeowner/Contractor Agreement(s) must be placed in the insuring binder. The contractor must finish the work in accordance with the written estimate and Homeowner/Contractor Agreement and any approved change order. As in the regular 203(k) program, the Rehabilitation Construction Period begins when the mortgage loan is closed.

What are the mortgagee’s requirements for paying contractors?

No more than two payments may be made to each contractor, or to the mortgagor if the mortgagor is performing the work under a self-help arrangement. The first payment is intended to defray material costs and shall not be more than 50% of the estimated costs of all repairs/improvements. When permits are required, those fees may be reimbursed to the contractor at closing. The final payment to the contractor will be made following completion of all work and release of any and all liens arising out of the contract or submission of receipts or other evidence of payment covering all subcontractors or suppliers who could file a legal claim. When necessary, the mortgagee may arrange a payment schedule, not to exceed two (2) releases, per specialized contractor (an initial release plus a final release.) Mortgagees are to issue payments solely to the contractor, except if the mortgagor is performing the work under a self-help arrangement, in which case the mortgagor may be reimbursed for materials purchased in accordance with the previously obtained estimates; the mortgagor may not be compensated for his or her labor.

May the mortgagee establish a Contingency Reserve?

The Streamlined (k) program does not mandate a contingency reserve to be established. However, at the mortgagee’s discretion, a contingency reserve account may be set up for administering the loan. Funds held back in contingency reserve must be used solely to pay for the proposed repairs or improvements and any unforeseen items related to these repair items. Any unspent funds remaining after the final work item payment(s) is made, must be applied to the mortgage principal.

Ineligible Repairs for the Streamlined (k) program?

  • Properties that require the following work items are not eligible for financing under the Streamlined (k):
  • 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.
  • Mortgagors may not use the Streamlined (k) program to finance any required repairs arising from the appraisal that does not appear on the list of Streamlined (k) Eligible Work Items or that would:
  • Necessitate a “consultant” to develop a “Specification of Repairs/Work Write-Up”;
  • Require plans or architectural exhibits;
  • Require a plan reviewer;
  • Require more than six months to complete;
  • Result in work not starting within 30 days after loan closing; or
  • Cause the mortgagor to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted. (FHA anticipates that, in a typical case, the mortgagor would be able to occupy the property after mortgage loan closing).

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