"John on radio station WYLL AM 1160 broadcasting news about the FHA 203(k) Program!"
John Moustis has been a Certified FHA 203(k) Consultant since 2000.
“In my 25 year career I have estimated job costs for more than 500 homebuyers purchasing
1-4 unit properties in the Chicagoland area”. Most of these jobs had come within 10% plus
or minus his estimate. Over 40 work write ups are performed each year consistently for the
last 3 years!
FHA 203(k) Program Outline:
The FHA 203(k) loan program is HUD’s primary program for the rehabilitation and repair of
single family properties. Basically a home improvement loan. As such, it is an important
tool for community and neighborhood revitalization and for expanding homeownership
opportunities. The FHA 203(k) loan program has been used in partnership with state and
local housing agencies and nonprofit organizations to rehabilitate properties. The funds are
provided through an approved FHA lender and are for financing the “as completed” value of
the home rather than the present value.
FHA 203(k) Loan - How the Program Can Be Used:
- To purchase or refinance a dwelling and the land on which the dwelling is located and
rehabilitate, repair or improve it.
- To purchase a dwelling on another site, move it onto a new foundation on the mortgaged
property and rehabilitate, repair or improve it.
- To refinance existing indebtedness and rehabilitate, repair or improve a dwelling.
- Single family dwellings
- Mixed Use (Storefront)
- 1-4 Unit buildings (Plus increase or decrease the number of units)
To be eligible for the FHA 203(k) program the property must be a one- to four-family
dwelling that has been completed for at least one year. The number of units on the site must
be acceptable according to local zoning requirements. All newly constructed units must be
attached to the existing dwelling. Cooperative units are not eligible.
Homes that have been demolished, or will be raised as part of the rehabilitation work, are
eligible provided some of the existing foundation system remains in place.
An existing house (or modular unit) on another site can be moved onto the mortgaged
property; however, release of loan proceeds for the existing structure on the non-mortgaged
property is not allowed until the new foundation has been properly inspected and the
dwelling has been properly placed and secured to the new foundation.
A 203(k) mortgage loan may be originated on a "mixed use" residential property provided:
(1) The property has no greater than 25 percent (for a one story building); 33 percent (for a
three story building); and 49 percent (for a two story building) of its floor area used for
commercial (storefront) purposes; (2) the commercial use will not affect the health and
safety of the occupants of the residential property; and (3) the rehabilitation funds will only
be used for the residential functions of the dwelling and areas used to access the residential
part of the property.
What is the minimum amount of repairs required on a FHA 203(k) home improvement
There is a minimum $5,000 requirement of eligible home improvement loan projects on the
existing structure of the property. Minor or cosmetic repairs may be included after meeting
the first $5,000 worth of repairs.
What are the qualifications to be able to obtain a FHA 203(k) loan?
The qualifications requirements are the same as a typical FHA mortgage loan.
Benefits of an FHA 203(k) Loan:
- Up to six months allotted for completion of rehabilitation construction.
- Down payments as low as 3.5% of the sales price – Can be a family member, may pay
all of the borrowers required down payments, closing costs, prepaid expenses, and
- Monthly MIP automatically is canceled once the unpaid principal balance is reduced to
- 2/1 temporary subsidy buydown plan on fixed-rate purchases.
- Purchases and rate/term refinances on 1-4 unit primary residences with fixed-rate and
- Have credit blemishes or low credit scores.
- Have limited cash for down payment or closing costs.
- Have a fully assumable loan to qualified borrowers.
- Have non-occupying co-borrowers that may go on the loan.
- Had a Chapter 7 bankruptcy which is allowed 24 months after the discharge date
established with good credit.
- Had a Chapter 13 after 12 months and gets court to approve the financing.
- Had a Foreclosure or deed-in-lieu which is allowed after 3 years.
- Qualifying ratios are 31% to 43%.
- Seller contributes/concession up to 6%.
- For those who may not qualify for a conventional loan.
Note: Additional benefits for police officers, fire fighters, emergency medical technicians,
and school teachers (Example: $100 down payment minimum).
Maximum Loan Limits in the Chicagoland 5 County Area:
1 Unit $410,000
2 Unit $524,850
3 Unit $634,450
4 Unit $788,450
Kitchen before a 203(k) Loan
FHA 203(k) Program Highlights