203(k) Mortgage Loans
203(k) loans are becoming more popular than ever in Georgia. This is because there are so many foreclosures on the market that need repairs. 203(k) loans will allow you to do repairs up to FHA limits in your area, but have a minimum of $5,000 that goes toward repairs. This loan allows a customer to finance the purchase price, or the existing balance, and the cost of improvements into the loan amount. There is one closing and funds are held into an escrow account and dispersed as work is completed. The program has the same guidelines as the regular FHA program and can be combined with the HUD $100 down program. You can have up to 6 months to complete the work, which is very generous.
There are 2 types of 203(k) loans, the standard program and the streamline program. Both are explained below:
The Streamlined FHA 203(k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. This program does not require a HUD consultant and inspections if the repairs are under $35,000. Eligible improvements are limited and can not include any major rehabilitation or remodeling.
Examples of eligible improvements for the Streamline program are listed below (this list is not all-inclusive):
- Repair/Replacement of roofs, gutters, and downspouts.
- Repair/Replacement/Upgrade of existing heating, ventilation, and air conditioning systems.
- Repair/Replacement of plumbing and electrical systems.
- Repair/Replacement of flooring.
- Minor remodeling that does not involve structural repairs, such as kitchens
- Exterior and interior painting.
- Weatherization, including storm windows and doors, insulation, weather stripping, etc.
- Purchase and installation of appliances, including free-standing ranges, refrigerators, washers and dryers, dishwashers, and microwaves.
- Improvements for accessibility for persons with disabilities.
- Lead-based paint stabilization or abatement of lead-based paint hazards.
- Repair/Replacement/Addition of exterior decks, patios, porches.
- Basement finishing and remodeling that does not involve structural repairs
- Basement waterproofing.
- Replacement of windows and doors and exterior wall re-siding.
The 203(k) standard is for major rehabilitation or remodeling, new construction such as a room addition, repairs
to structural damage, or site amenity improvements. This program is going to require a HUD consultant and you will have to have periodic inspections of the progress.
Examples of eligible improvements are listed below: (this list is not all-inclusive)
- Structural alterations and reconstruction (repair or replacement of structural damage, chimney repair, additions to the structure, installation of an additional bath(s), skylights, finished attics and/or basements, repair of termite damage and the treatment against termites or other insect infestation, etc.).
- Rehabilitation or improvements to a detached garage, a new detached garage, or the addition of an attached unit(s) (if allowed by the local zoning ordinances) can also be included. Properties with separate detached units are acceptable; however, a newly constructed unit must be attached to an existing unit to be eligible.
- Changes for improved functions and modernization (remodeled bathrooms and kitchens, including permanently installed appliances, i.e., built-in range and/or oven, range hood, microwave, dishwasher).
- Elimination of health and safety hazards (including the resolution of defective paint surfaces or lead-based paint problems on homes built prior to 1978).
- Changes for aesthetic appeal and elimination of obsolescence (new exterior siding, adding a second story to the home, covered porch, stair railings,attached carport).
- Reconditioning or replacement of plumbing (including connecting to public water and/or sewer system), heating, air conditioning and electrical systems.
- Installation of new plumbing fixtures is acceptable, including interior whirlpool bathtubs.
- Roofing, gutters and downspouts. Flooring, tiling and carpeting.
- Energy conservation improvements (new double pane windows, steel insulated exterior doors, insulation, solar domestic hot water systems, caulking and weather-stripping, etc.).
- Major landscape work and site improvement, patios, decks and terraces that improve the value of the property equal to the dollar amount spent on the improvements or required to preserve the property from erosion. The correction of grading and drainage problems is also acceptable.
- Improvements for accessibility to the Handicapped (e.g., remodeling kitchens and baths for wheelchair access, lowering kitchen cabinets, installing wider doors and exterior ramps, etc). When basic improvements are involved, the following costs can be included in addition to the minimum $5,000 requirement:
- New free standing range, refrigerator, washer and dryer, trash compactor and other appurtenances (Used appliances are not eligible).
- Interior and exterior painting.
- The repair of a swimming pool not to exceed $1,500. Repair costs exceeding the $1,500 limit must be paid into the contingency reserve fund by the borrower. The installation of a new swimming pool is not allowed.