FHA 203K Rehab Loans
An FHA 203K Rehab loans can be a great tool for a home that needs a little, or a lot of work, but its not for every instance. Knowing the limits of this product will save a lot of frustration.
FHA 203K Limited or Standard:
The 203k product is designed to rehabilitate a property into FHA compliance, and provide financing for the purchase of the home plus the renovation costs. These rehabilitation costs are capped at certain levels based on the area you are applying in. In Virginia the cap ranges from $356,362 to $822,375 depending on the area.
There are two forms of FHA 203K rehab loans available: limited and standard. The limited product is capped at $35,000 in renovation costs and will only require contractor quotes in terms of those improvements. The standard product allows renovations above $35,000, but will require a feasibility study by an FHA panel consultant in addition to the renovation costs.
Both of these products will require that three basic standards be met: Safety, Soundness, Security (These requirements summaries of those found in II.A.3.a "Property Acceptability Criteria" pg. 170-182).
Safety - there cannot be any safety hazards on the property. This includes lack of railings to protect against falls, unsafe conditions on the site, environmental hazards.
Soundness - the structures must be sound. No building on the property can be in a state of danger of collapse in the near future.
Security - the property must conform to the HUD 4000.1 standards for "securing" an FHA loan. This includes minimum distances from gas stations, underground storage tanks, gas wells, water sources, lead-based paint requirements.