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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.
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
This website is intended to provide a basic understanding of this
information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
Any information received here should be confirmed with the appropriate
government agencies or with an attorney, particularly as it relates
to your individual circumstances. Your use of this website indicates
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