FHA loans remain one of the most popular mortgage financing options in Texas. The FHA 203K version is basically the same as a regular FHA loan, with one key difference – this program allows for renovation costs to be included in the homebuyer loan. Let’s take a detailed look at latest Texas FHA 203K guide and everything home buyers will need to know.
FHA 203k, also known as the home repair or renovation loan, is one of the most diverse home improvement loans out there. Buyers can use this loan for needed repairs, upgrades, remodels and building of a new structure on a house you own or will own. The 203(k) for great simple upgrades like kitchen remodeling, bathroom or completely reconstruct a home that is in need of repair. You can borrow up to 96.5% of the post-renovation appraised value. This is great for first time home buyers in Dallas, Austin, San Antonio, etc.
The limited FHA203k is for renovations under $35,000. Also available is the standard 203k for larger renovations over $35,000. Both programs require 3.5% down payment, and home buyers must meet all the basic FHA qualifying requirements in regards to credit and so forth.
The Streamline 203k program is most commonly used for simple cosmetic repairs not exceeding $35,000 and includes WDO repairs, roof, gutters, etc. It may also be used for HVAC systems, electrical, plumbing, minor improvements to kitchens, bedrooms or bathrooms, flooring, painting as well as new energy efficient window upgrades and door weather stripping and insulation. The 203k light rehab loan encourages funds for energy efficient additions, removing lead paint, and the addition of decks, patios, porches, septic and well system. A borrower may also use the funds to purchase a washer or dryer, or new kitchen appliances.
Items not eligible for the 203k Streamline light rehab loan are landscaping and yard work and major remodeling or rehabilitation to any dwelling. It is also not for moving walls, additions or fixing major structural damage to the house. The full 203K loan allows in-depth repairs over 35K.
FHA 203(k) Terms:
The loan terms are standard 30 or 15-year fix. With the 203k light rehab loan, no minimum loan balance is required; however, buyers must intend to occupy the property as their primary residence once the repairs are complete. This is not a loan for investors that want to fix/flip a property. The property may not be vacant for more than 30 days and all work must be completed within six months. You do not have to hire a HUD-approved contractor; however, a licensed professional must complete all eligible repairs. All repairs must begin within 30 days after the closing.
Who Does the Work?
The 203k mortgage allows the buyer to select their licensed contractor and the lender will review the contractor’s credentials and experience. The lender will get a firm estimate from the chosen contractor and generally add 10% to the repair costs. Buyers can even arrange to complete some of the work themselves as long as they document showing that you are qualified to complete the said repairs.
FHA 203K Q&A:
What is the maximum FHA 203k loan amount?
FHA 203k loans are available in amounts from 275K-630K + depending on your state and county. You can visit the HUD website and look up your county loan limit.
Is there a required down payment?
Yes, just like the standard FHA loan a minimum of 3.5% is required.
What types of repairs are allowed with a Streamlined version 203(k)?
- Patio or porch additions
- HVAC repairs
- Home improvements for accessibility for disabled
- Finishing a basement
- Installing a new roof.
- Window replacement
- Siding replacement
- Exterior painting
- Energy Savings upgrades
What types of repairs are permitted with a FULL 203(k)?
- Structural alterations and additions to the house. New home additions must be attached to the existing structure.
- Kitchen or bath remodel
- Minor foundation issues
- Repairs that have a total cost of $35k or more
- Modernization and improvements to the home’s function
- Elimination of health and safety hazards.
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