What is a 203(k) Renovation Loan?

A 203(k) Loan is a loan program that allows a customer to finance both the purchase price of a home, and the cost of any improvements needed into a single loan amount and payment.

Buyers receive the funds to purchase and renovate the home in one seamless transaction. This simplifies the purchase and renovation process by providing:

• One application
• One approval process
• One closing
• One monthly payment

Interest rates for a 203(k) Loan vary, but typically in a lower rate and lower payment than financing through home improvement loans, home equity loans, or even through the use of credit cards.  With the typical new home owner accumulating an average of $8,000 in debt on credit cards for home related improvements, the savings realized by using a 203(k) loan can be substantial!

Almost any kind of repair or improvement can be financed depending on the type of renovation loan used. These improvements include:

• Structural improvements/changes/additions (not on Streamline)
• Remodeling kitchens and baths
• Eliminate health and safety hazards such as lead-based paint and mold abatement
• Changes for cosmetic appeal such as new siding, painting, landscaping
• General replacement of electrical, air conditioning, plumbing, installation of well and/or septic tanks
• Completely rebuilding a home on modified existing foundation (Remodel to Perm)
• Installing improvements for disabled access
• Installing or repairing swimming pools (Conventional only)
• Adding a garage (Conventional only)
• Finishing a basement
• Adding sun rooms, hot tubs, decks (Conventional only)

Types of 203(k) Renovation Loans

203(k) Loans come in three different packages, described below:

Standard FHA 203(k)

• Minimum of $5,000 in repairs with no limit
• Allowable renovations cover Health, Safety, and Livability issues, but no “luxury items” such as pools
• Must be Owner Occupied properties, no investment or rentals

Conventional

• No minimum amount of repairs, but limited to within 75% of After-Improved Value
• No Restrictions on types of renovation work
• Homes can be Owner Occupied, Second Homes, or even Investment Properties
• Must receive Contractor Bids for work

Streamline

• No minimum amount of repairs, maximum of $35,000 in renovations allowed
• No Luxury or Structural renovations
• Owner Occupied homes only
• Must receive Contractor Bids for work

Why Use Knipp Contracting?

Knipp Contracting has extensive experience working with lenders and customers on 203(k) loan renovations projects.  With this experience, Knipp Contracting can bring the following advantages to your project:

• The use of a licensed, bonded, and insured contractor to fulfill lender requirements for bidding and licensing of construction activities
• Relationships with pre-qualified, top quality trade contractors
• Warranty on all construction work performed
• Liability protection for the home owner or investor
• A single point of contact for all construction activities

If you have any more questions about the 203(k) loan process, or how Knipp Contracting can help you with your next renovation project, please contact us!