Home Rehab Loans (Section 203k)
Eligible Home Improvements

For home rehab activities that do not also require buying or refinancing the property, borrowers may also consider a Title I Home Improvement Loan.

Mortgage proceeds from a Section 203(k) rehab loan must be used in part for rehab and/or improvements to a home. There is a minimum $5,000 requirement for the eligible improvements on the existing structures on the property. Rehab or improvement to a detached garage, a new detached garage, or the addition of an attached unit(s) (if allowed by the local zoning ordinances) can also be included in this first $5,000. Properties with separate detached units are acceptable, however, a newly constructed unit must be attached to an existing unit to be eligible under 203(k).

Any repair is acceptable in the first $5,000 requirement that may affect the health and safety of the occupants. Minor or cosmetic repairs by themselves cannot be included in the first $5,000, but may be added after the $5,000 threshold is reached.

The types of home improvements that borrowers may make using a Section 203(k) rehab loan include, but are not limited to, the following:

  • Roofing, gutters and downspouts
  • Replacing floors, tiling, or carpeting
  • Reconditioning or replacement of plumbing, heating, air conditioning and electrical systems
    Connecting to the public water and/or sewer system, installation of new plumbing fixtures (including interior whirlpool bathtubs), etc.
  • Structural alterations, reconstruction, and renovation
    Repairing or replacing structural damage, repairing a chimney, making additions to the structure, installing additional bathrooms, bedrooms, a family room, skylights, finishing a basement or attic, repairing termite damage and financing treatments against termites or other insect infestation, etc.
  • Modernization and improvements to the home's function
    Remodeling bathrooms or a kitchen, including new permanently built-in appliances, such as a built-in range, oven, range hood, microwave, dishwasher, etc.
  • Changes that improve appearance and eliminate obsolescence
    Adding or repairing exterior siding, a second story to the home, a covered porch, stair railings, expanding or building a garage or carport, etc.
  • Elimination of health and safety hazards
    Including the resolution of defective paint surfaces or lead-based paint problems on homes built prior to 1978
  • Energy conservation improvements
    Installing energy efficient windows or doors (such as new double pane windows or steel insulated exterior doors), insulation, solar domestic hot water systems, caulking and weatherstripping, etc.
  • Major landscape work and site improvement
    Adding a porch, deck, patio, or terrace that improves the value of the property equal to the dollar amount spent on the improvement or required to preserve the property from erosion. Correcting grading and drainage problems is also acceptable. Tree removal is acceptable if the tree is a safety hazard to the property. Repairing existing walks and a driveway is acceptable if it may affect the safety of the property. Fencing, new walks, driveways, and general landscape work (i.e., trees, shrubs, seeding or sodding) cannot be in the first $5000 requirement.
  • Installation of a Well and/or Septic System
    The well or septic system must be installed or repaired prior to beginning any other repairs to the property. A property less than 1/2 acre with a separate well or septic system is not acceptable. A property less than one acre with both a well and a septic system is unacceptable. However, the local HUD Field Office can approve smaller lot size requirements where the local health authority can justify smaller lots. The installation of a new well or the repair of an existing well (used for the primary water source to the property) can be allowed provided there is adequate documentation to show there is reason to believe the well will produce a sufficient amount of potable water for the occupants. A well log of surrounding properties from the local health authority is acceptable documentation.
  • Improvements for accessibility to a disabled person
    Remodeling kitchens and baths for wheelchair access, lowering kitchen cabinets, installing wider doors and exterior ramps, etc.

When basic improvements are involved, the following costs can be included in addition to the minimum $5,000 requirement:

  • New free standing range, refrigerator, washer and dryer, trash compactor and other appurtenances (used appliances are not eligible)
  • Interior and exterior painting
  • The repair of a swimming pool, not to exceed $1,500. Repair costs exceeding the $1,500 limit must be paid into the contingency reserve fund by the borrower. The installation of a new swimming pool is not allowed.

Luxury items and improvements that do not become a permanent part of the real property are not eligible as a cost of rehab. The following items, or their repair, are examples of unacceptable items for 203(k) rehab loans (this list is not exhaustive): barbecue pit, bathhouse, dumbwaiter, exterior hot tub, sauna, spa and whirlpool bath, outdoor fireplace or hearth, photo mural, installation of a new swimming pool, gazebo, television antenna, satellite dish, tennis court, tree surgery. Also, additions or alterations to provide for commercial use are not eligible.

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