The Federal Housing Administration (FHA) has updated its 203(k) Rehabilitation Mortgage Insurance Program that provides financing for renovating or rehabilitating single-family homes.
FHA offers two variations of the 203(k) program: the Standard 203(k) for substantial remodeling and repairs, and the Limited 203(k) for minor remodeling and nonstructural repairs. The updates to the program include an increase in the allowable total rehabilitation costs a borrower can finance under the Limited 203(k) program from $35,000 to $75,000; the limit will be reviewed on an annual basis.
The updates also include providing more time for rehabilitation and repair work to be completed by extending the rehabilitation period to 12 months for the Standard 203(k) and nine months for the Limited 203(k). The program will also allow the financing of the 203(k) Consultant Fee in the total mortgage amount for the Limited 203(k) if a borrower chooses to use a 203(k) Consultant. A new fee structure for the 203(k) Consultant is included in the updates.
“The changes we are announcing today for the 203(k) program are long overdue and will support greater use of this program where it is needed most – in neighborhoods where homes are affordable but need repair,” said Federal Housing Commissioner Julia Gordon. “Increased use of 203(k) mortgages will help modernize and revitalize homes, which supports affordable housing supply and strengthens neighborhoods.”
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Just checking, does normal closing occur before repairs are completed?
You can borrow up to 110% of the property’s proposed future value, or the home price plus renovation costs, whichever is less. Closing occurs first based, leaving the remaining repair funds held in escrow to be disbursed upon completion of repairs and inspections.