"John on radio station WYLL AM 1160 broadcasting news about the FHA 203(k) Program!"
John Moustis has been a Certified FHA 203(k) Consultant since 1991.
“In my 35 years I have estimated job costs for more than 500 homebuyers and existing homeowners who
have either purchased 1-4 unit properties in the Chicagoland area” or owned a home where it needed
some work. Most of these renovation jobs I estimated had come within 10% plus or minus of the actual
work. Over 40 work write ups are performed each year on the average!
FHA 203(k) Program Outline:
The FHA 203(k) loan program is HUD’s primary program for the rehabilitation and repair of single
family properties (1 - 4 Units). Basically, its a home improvement loan financed through one loan! I
feel it is an important tool for community and neighborhood revitalization plus for expanding
homeownership opportunities. The FHA 203(k) loan program which has been around for a number of
years, has been used in partnership with state and local housing agencies plus nonprofit organizations to
rehabilitate properties. The funds are provided through an approved FHA lender and are for financing
the “as completed” value of the home rather than the present value. This is a huge advantage!
FHA 203(k) Loan - How the Program Can Be Used:
- To purchase or refinance a dwelling and the land on which the dwelling is located and
rehabilitate, repair or improve it.
- To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property
and rehabilitate, repair or improve it.
- To refinance existing indebtedness and rehabilitate, repair or improve a dwelling.
- Single family dwellings
- Mixed Use (Storefront)
- 1-4 Unit buildings (Plus increase or decrease the number of units)
To be eligible for the FHA 203(k) program the property must be have been completed for at least one
year. The number of units on the site must be acceptable according to local zoning requirements. All
newly constructed units must be attached to the existing dwelling. Cooperative units are not eligible.
Homes that have been demolished or will be raised as part of the rehabilitation work, are eligible
provided some of the existing foundation system remains in place (75%).
Note: An existing house (or modular unit) on another site can be moved onto the mortgaged property,
however, release of loan proceeds for the existing structure on the non-mortgaged property is not
allowed until the new foundation has been properly inspected and the dwelling has been properly
placed and secured to the new foundation.
A 203(k) mortgage loan may be originated on a "mixed use" residential property provided: (1) The
property has no greater than 25 percent (for a one story building); 33 percent (for a three story
building); and 49 percent (for a two story building) of its floor area used for commercial (storefront)
purposes; (2) the commercial use will not affect the health and safety of the occupants of the residential
property; and (3) the rehabilitation funds will only be used for the residential functions of the dwelling
and areas used to access the residential part of the property.
What is the minimum amount of repairs required on a FHA 203(k) home improvement loan?
There is a minimum $5,000 requirement of eligible home improvement loan projects on the existing
structure of the property. Minor or cosmetic repairs may be included after meeting the first $5,000
worth of repairs.
What are the qualifications to be able to obtain a FHA 203(k) loan?
The qualifications requirements are the same as a typical FHA mortgage loan.
Benefits of an FHA 203(k) Loan:
- Up to six months allotted for completion of rehabilitation construction.
- Down payments as low as 3.5% of the sales price – Can be a family member, may pay all of the
borrowers required down payments, closing costs, prepaid expenses, and discount points.
- Monthly MIP automatically is canceled once the unpaid principal balance is reduced to 78%.
- 2/1 temporary subsidy buydown plan on fixed-rate purchases.
- Purchases and rate/term refinances on 1-4 unit primary residences with fixed-rate and adjustable-
- Have credit blemishes or low credit scores.
- Have limited cash for down payment or closing costs.
- Have a fully assumable loan to qualified borrowers.
- Have non-occupying co-borrowers that may go on the loan.
- Had a Chapter 7 bankruptcy which is allowed 24 months after the discharge date established with
- Had a Chapter 13 after 12 months and gets court to approve the financing.
- Had a Foreclosure or deed-in-lieu which is allowed after 3 years.
- Qualifying ratios are 31% to 43%.
- Seller contributes/concession up to 6%.
- For those who may not qualify for a conventional loan.
Note: Additional benefits for police officers, fire fighters, emergency medical technicians, and school
teachers (Example: $100 down payment minimum).
Maximum Loan Limits in the Chicagoland 5 County Area:
1 Unit $379,500
2 Unit $485,800
3 Unit $587,250
4 Unit $729,800
FHA 203(k) Program Highlights
A "Before" picture of a home that was
renovated with the 203k Program