What Does a 203k Cover?
Before you apply for your 203k loan, you need to make sure that you have a very clear understanding of the nature of this renovation loan and for what it can be used so that you know that you are not wasting your time on a loan that wont work for you. A 203k loan covers home renovations and home repairs. This loan has been designed specifically with the intention of encouraging the financial institutions to lend money for the purchase of risky properties. This loan is also to encourage buyers to go for homes that need renovation. Buyers that do not have adequate funds to take care of the renovation work after the purchase of a home; in such cases, buyers normally get discouraged and would not want to purchase such properties. This loan encourages buyers to choose risky properties without any hesitation because the loan covers the expenses involved in repair work.
FHA has its own guidelines on what types of repair work or renovation work are covered by a 203k. Before applying for your 203k loan you should know what it covers. If you have pool repair in mind then a 203k may not be the right loan for you. There are two types of 203k loans and the scope of these two loans vary. If you are planning to go for minor repair or minor renovations that would cost you less than $35,000 then you should go for streamline 203k. If you are planning to extend your building by adding another room then you should go for standard 203k.
Options on Rehab
Here are few broad areas of home repairs and renovations that are covered under 203k loans: Deck repair, patio repair or renovation, painting, extension of structural areas such as addition of another room, bathroom remodeling , kitchen remodeling, drainage, attic renovation or basement work, other structural repairs, addition of another story, treatment of lead based paints, repair of heating system or air conditioning systems, plumbing repairs, repair of energy conservation systems, flooring repair and roofing repairs.
What’s Not Covered
Some of the areas of repair work are not covered by a 203k. Basically all those areas of repair work that would be considered ‘luxury’. For example, it will not include tennis court maintenance, sauna bath repair, hot tubs, swimming pool maintenance, etc. Landscaping is also not covered by a 203k loan. However, rather than presuming what will be allowed or what will not be allowed, it is best to check with your financial institution on what their terms and conditions are so that you get a clear picture of the scope of your 203k loan.
About the Author
The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.