Modus Mortgage


Renovation Overview

Also known as a rehab loan renovation loan, FHA 203(k) are purchase or refinance loans that cover the cost of the home itself and the cost to renovate in one fell swoop. These are a good option if a buyer is considering a home that needs a number of repairs, and meets the FHA requirements to qualify. Repairs must be completed by a contractor, the borrower must have a 500 credit score or better, and the property must be the borrower’s primary residency.

There are two types of 203(k) loans: Streamline and Standard.

Streamline: Also known as a limited 203(k), is used on homes that require fewer repairs. Streamline rehab loans don’t have a minimum cost, but they do have a cap of $35,000 and major structural repairs are excluded from what the funds can be used for. Streamline loans are great for things like installing energy-efficient windows, improving curb appeal, or redoing landscaping.

Standard: On the other hand, a Standard 203(k) rehab loan can be used for major structural repairs. Repairs covered under Standard rehab loans must cost a minimum of $5,000 to complete and a HUD representative must be consulted and oversees the entirety of the renovation process. Plumbing, roofing, waste system, and major interior work are can all be covered by a Standard rehab loan.

One thing worth noting: luxury upgrades like a swimming pool, hot tub, or outdoor kitchens are not covered by either Streamline or Standard 203(k) rehab loans. The easiest way to think about it is that if the work doesn’t improve the home’s livability or functionality, it’s likely not covered.




Skip to content