203k Construction Loans

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203K Construction Loan

A 203k construction loan is designed to help borrowers looking to finance home renovations with the purchase or refinance of a home. Backed by the Federal Housing Administration (FHA), these loans combine the price of the home and the estimated price of the repairs, including labor and materials, into one mortgage payment.

Home Point Financial offers both Standard and Limited 203k loans. The standard 203k is used for projects requiring over $35,000 in renovation funds, where any structural work is being done. The limited 203k is the choice for a minimal project, where no structural work is being completed and the costs of renovation are under $35,000. The disbursements on the standard 203k are done on an “as completed” basis, while the disbursements on the limited 203k are done in two draws, half the money up front and the other half when work is completed.

Renovations include but are not limited to the following:

  • Minor repairs: paint, carpet, flooring, appliances (including washers, dryers and refrigerators)
  • Major repairs: heating, electrical, air conditioning, plumbing systems, new roof, new windows, doors, foundation, etc.
  • Remodels: kitchen remodel, bathroom remodel
  • Add-ons: bedrooms, bathrooms, family rooms, dining rooms, new garage, even additional units!
  • Landscaping: new fencing, driveways, walkways, irrigation systems (sprinklers), repair of existing swimming pool
  • Certifications: termite clearance, well and septic certifications, roof certifications.

Like all other loan programs, 203k construction loans have guidelines that must be met to qualify. Below outlines some of the parameters:

  • Minimum down payment of 3.5% is required
  • Present a detailed proposal and cost estimate of the work
  • For Standard, the minimum repair cost threshold is $5,000. The maximum loan amount is the lesser of FHA loan limit for the area or applicable LTV limits
  • For Limited, there is not a minimum repair cost threshold. The maximum is the lesser of FHA loan limit for the area or applicable LTV limits
  • 203k HUD consultant is required
  • All work must be completed within 6 months of closing and work is to begin no later than 30 days after closing
  • Minimum 640 credit score required