What does a 203(k) loan cover?

There are two types of FHA 203(k) loans: the Standard 203(k) loan and the Streamline 203(k) loan (aka Limited 203(k) loan). What you can use the loans for depend on which type of loan you get.

Generally, the Standard 203(k) loan may be used for improvements and repairs, including cosmetic ones, that are at least $5,000. The Streamline 203(k) loan, however, has a limit of $35,000 that you can get in financing for renovations. There is no minimum amount for repairs. The Streamline 203(k) mortgage may also only be used for minor renovations and cannot be used for structural repairs or improvements.

What does the Standard 203(k) loan cover?

• Complete demolition as long as the existing foundation remains in place
• Converting a single-unit property to multi-unit property or vice-versa
• Structural and existing foundation repairs, changes, and reconstruction
• Modernizing and improving the home's function
• Eliminating health and safety hazards
• Changes that improve appearance and eliminate anything outdated
• Repairing/replacing plumbing, heating, AC, and electrical systems
• Reconditioning or replacing plumbing, including installing a well and/or septic system, or connecting to public water and sewage systems
• Adding or replacing roofing, gutters, and downspouts
• Adding or replacing floors and/or floor treatments
• Landscape work and site improvements
• Creating or enhancing accessibility for a disabled person
• Making improvements that’ll help with energy conservation
• Purchasing an existing property on another site, moving it onto a new foundation, and repairing/renovating it
• Installing or repairing exterior decks, patios, porches, fences, walkways, driveways, and garages
• Installing new appliances, including a new refrigerator, cooktop, oven, dishwasher, built-in microwave oven, and washer/dryer
• Repairing or removing an existing in-ground swimming pool
• installing smoke detectors
• Landscaping and making site improvements
• Constructing a windstorm shelter
• Covering lead-based paint stabilization costs, if the home was built before 1978

What does the Standard 203(k) loan not cover?

Both the Standard 203(k) mortgage and the Streamline 203(k) mortgage may not be used on renovations for the part of the property that will be used for commercial purposes and on recreational or luxury improvements. These include:

• New swimming pools (existing swimming pools can be repaired)
• An exterior hot tub, spa, whirlpool bath, or sauna
• Barbecue pits, outdoor fireplaces or hearths
• Bath houses
• Tennis courts
• Satellite dishes
• Repairing trees (except when getting rid of something that endangers existing improvements)
• Murals
• Gazebos

What does the Streamline 203(k) loan cover?

The Streamline 203(k) loan may only be used for minor remodeling and non-structural repairs, such as improving and modernizing existing parts of the home. The total renovation cost may not exceed $35,000. Unlike the Standard 203(k) loan, there is no minimum repair cost. You may use a Streamline 203(k) loan on:

• Eliminating health and safety hazards that would violate the U.S. Housing and Urban Development (HUD)'s minimum housing standard
• Repairing or replacing wells and/or septic systems
• Connecting to public water and sewage systems
• Repairing or replacing plumbing, heating, AC, and electrical systems
• Eliminating anything that’s outdated
• Repairing or installing new roofing (provided the structural integrity will not be impacted by the work), siding, gutters, and downspouts
• Making improvements that’ll help with energy conservation
• 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 existing in-ground swimming pool
• installing smoke detectors
• Covering lead-based paint stabilization costs if the home was built before 1978
• Creating accessibility for persons with disabilities

What does the Streamline 203(k) loan not cover?

The Streamline 203(k) loan might not be used for major renovations and structural changes. The FHA considers a repair to be major when:

• The repair or improvements are expected to require more than six months to complete
• The repair or improvements require more than two payments per specialized contractor
• The repair prevents you from occupying the home for more than 15 days
• Required repairs from the appraisal would need a 203(k) Consultant or contractor to develop a work repair write-up, plans, or architectural exhibits

The Streamline 203(k) mortgage also may not be used to finance the following:

• Converting a one-family unit property to a multi-family property
• Decreasing an existing multi-family property to a one- to four-family property
• Reconstructing a property that has been or will be demolished
• Repairing, reconstructing, or elevating an existing foundation
• Purchasing an existing structure on another site and moving it onto a new foundation
• Making structural changes, such repairing structural damage or adding a new room
• Landscaping and site improvements
• Constructing a windstorm shelter