I have worked as a 203K consultant since 2003 serving many central Washington counties.

What is a 203K loan?

A mortgage loan that can be used to buy and fix up handyman specials or improve your existing house and have the repair cost built into the mortgage. The one loan covers the purchase and the repair.

What types of improvements are allowed?

  • Required repairs or upgrades may be needed to meet the FHA minimum property standards.
  • The borrower may choose to replace or upgrade certain "worn" items.
  • The borrower may choose to install eligible items.

Why is a consultant needed?

  • To complete the Work Write Up, the consultant will meet with the borrower at the subject property to complete a walk through inspection.
  • The consultant will note all FHA minimum property standards and required repairs and will find out what additional repairs, renovations, upgrades, etc., the borrower may want.
  • The consultant must also make sure the property meets the $5,000 minimum required/eligible repair guidelines.

Who are 203K consultants?

  • The 203K consultant is someone who has been designated by FHA to act as a consultant to borrowers. To be designated, the consultant has met the experience requirements for HUD approval and has been trained in the Work Write Up and Specification of Repairs format of the 203K program.

What does the 203K consultant do?

  • The 203K consultant completes the Feasibility Study, Work Write Up, the required architectural exhibits and the Specification Of Repairs.
  • The quantity and the cost of each item must be shown, as well as a complete description of the work for each item on a room by room basis.

Eligible items or improvements

Eligible improvements for HUD 203K type loans do not include luxury items and improvements that do not become a permanent part of the real property.

However, the homeowner can use the 203K rehab program to finance such items as painting, room additions, decks and other items even if the home does not need any other improvements.

What Eligible Improvements are acceptable for the HUD 203K?

  • 1. Structural improvements and reconstruction. Examples would be repairs to the foundation, basement, finished attics, and termite damage.
  • 2. Changes for improved functions and modernization. Examples would be remodeled bathrooms, kitchens, new appliances.
  • 3. Elimination of health and safety hazards. Examples would be removal of mold, lead-based paint.
  • 4. Changes for aesthetic appeal and elimination of obsolescence. New exterior siding, adding a second story, covered porch.
  • 5. Reconditioning or replacement of plumbing, heating, air conditioning and electrical systems. Even whirlpool bathtubs are included in 203K rehab loan.
  • 6. Installation of well and septic system. There are restrictions on where you can put a well and septic system.
  • 7. Roofing, gutters and downspouts are also eligible for HUD 203K.
  • 8. Flooring, tiling and carpeting.
  • 9. Energy conservation improvements such as new double pane windows, insulation, solar hot water systems, caulking and weather stripping.
  • 10. Major landscape work and site improvements.
  • 11. Improvements for accessibility to disabled.
  • 12. A new garage as long it is attached to the property.

As you can see pretty much everything is included in the HUD 203K.

There is a time period for doing the improvements for the 203K rehab. The work has to begin within 30 days of execution of the Rehabilitation Agreement. The work must not stop for more than 30 consecutive days. The work has to be completed within 6 months.

The cost of the repairs cannot increases during the construction period more than what the approved 203K rehab loan amount. It is very important in the beginning to get a general contractor who will accurately estimate the cost of the improvements for the HUD 203K.

Investors can not use the 203K rehab loan program. The HUD 203K program is for only homeowners using FHA insured financing.