203(k) Rehab Mortgage Insurance

203(k) REHABILITATION MORTGAGE INSURANCE PROGRAM

Section 203(k) insures mortgages covering the purchase or refinancing and rehabilitation of a home that is at least a year old. A portion of the loan proceeds are used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released when the rehabilitation is completed. Section 203(k) offers:

a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable-rate loan that covers the acquisition and rehabilitation of a property.
affordability and flexibility of FHA-insured financing.
the lender protection by allowing them to have the loan insured prior to completion of rehabilitation, even before the condition and value of the property may offer adequate security.
the lender the opportunity to help address climate change by insuring the financing of cost-effective energy efficient improvements.

Types of Programs

Standard 203(k)

For major rehabilitation or repairs.

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Limited 203(k)

For less expensive repairs/improvements.

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NOTE: For housing rehabilitation activities that do not also require buying or refinancing the property, borrowers may also consider HUD's Title 1 Property Improvement Loan Program.

Acceptable Property Types

Single family homes.
Single family homes with eligible accessories dwelling units.
Two- to four-family units Townhomes.

Eligible condominium units and site condo units (improvements are limited to the unit's interior).
Manufactured homes titled as real estate, where the rehabilitation does not affect the structural components.

HUD Homes/Real-Estate Owned properties.
Mixed use properties that are primarily residential (at least 51%).

Eligible Improvements Include but are not limited to

Eliminating health and safety hazards that would violate FHA's Minimum Property Requirements (MPR).
Reconstructing a structure that has been or will be demolished provided the complete existing foundation system is not affected and will still be used.
Repairing, reconstructing, or elevating an existing foundation where the structure will not be demolished.
Making structural alterations such as the repair or replacement of structural damage, additions to the structure, and finished attics and/or basements.

Rehabilitating, improving, or constructing a garage.
Repairing/replacing plumbing, heating, air conditioning, and electrical systems.
Making changes for improved functions and modernization.
Repairing or installing new roofing, siding, gutters, and downspouts.

Installing or repairing fences, walkways, driveways, exterior decks, patios, and porches.
Installing a new refrigerator, cooktop, oven, dishwasher, built-in microwave oven, and washer/dryer.
Repairing or removing an in-ground swimming pool.
Creating accessibility for persons with disabilities.