I Want to Remodel but Don't Have the Funds—What Can I Do?

Did you know that you may qualify to rehab a home you own or are purchasing with a HUD 203(k) rehabilitation loan?

Many of us wish we could improve on our current home or think of purchasing a fixer-upper but don’t have the funds to fix-it-up. Did you know that you might qualify to rehab a home you own or are purchasing with a HUD 203(k) rehabilitation loan? To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work.

Example of Eligible Improvements

  • Repair/replacement of roofs, gutters and downspouts
  • Repair/replacement of flooring
  • Minor remodeling that does not involve structural repairs (i.e.: kitchens and bathrooms)
  • Exterior and interior painting
  • Improvements for accessibility for persons with disabilities
  • Lead-based paint stabilization or abatement of lead-based paint hazards
  • Repair/replacement/addition of exterior decks, patios, porches
  • Replacement of window and doors and exterior wall re-siding


 Examples of Ineligible Improvements

  • Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall
  • New construction (including room additions)
  • Repair of structural damage
  • Landscaping or similar site amenity improvements
  • Any repair or improvement requiring a work schedule longer than six (6) months


Application Process

  • Preliminary Feasibility Analysis

The extent of the rehabilitation work required is determined with a rough cost estimate of the work. An expected market value of the property after completion of the work is determined.

  • Homebuyer/Homeowner Selects HUD Mortgage Lender
  • Consultant Prepares Work Write-up and Cost Estimate
  • Fee Consultant Visits Property

The homebuyer and contractor (where applicable) meet with the fee consultant to ensure that the scope of work and exhibits are acceptable.

  • Appraiser Performs the Appraisal
  • Lender Reviews the Application
  • Rehabilitation Construction Begins

At loan closing, the mortgage proceeds will be disbursed to pay off the seller (if a new purchase) and the Rehabilitation Escrow Account will be established. Construction may begin.

  • Completion of Work/Final Inspection

This is a great option to consider. So the 1st steps will be to talk to your Real Estate Agent if you are purchasing, Remodeling Contractor to obtain an estimate, and then a HUD lender for review.

Susan Lawson is the Business Development Manager for Guedes Constructionand the Community Network Coordinator for the non-profit organization Soldiers’ Angels. She can be reached via email for Guedes atsusan@guedesconstruction.com or for volunteering and information on how to support our military through Soldiers’ Angels email Susan at ctlca26@gmail.com

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Bob Bekins July 26, 2012 at 05:39 PM
With short sale and foreclosure owners not in a financial position to keep up the properties, we Realtors find ourselves at the mercy of the conditions they have left behind. The 203K FHA loan cannot be used on every property but it is excellent where it is applicable. The neighborhood is improved, the new HOME OWNER gets something they will be proud to move into and the lending bank has a more committed borrower and lower risk because of the improved value of the property. Sounds like a Win Win Win to me. Bob Bekins specializing in homes for First Time Buyers, has written the book, Just This Once, a guide to buying your first home, see www.AGuyNamedBob.com
Margie Logue September 21, 2012 at 01:35 PM
How much does all this cost up front?
Susan Lawson September 21, 2012 at 03:43 PM
Margie, there are several 203K specialists in the area and I will defer to a Wells Fargo rep who can answer your questions with a free consultation. Tood Eldridge (760)207-2295


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