Remodeling with the 203(k) Program
The Department of Housing and Urban Development (HUD) designed the 203(k) Loan Program to help rehabilitate the nation’s existing housing inventory and to give families an opportunity to purchase and rehab a property as a primary residence.
With an attractive interest rate and relatively-easy qualification process, the 203(k) Loan Program is a perfect choice for homebuyers looking to purchase and customize a home to their liking. As of 1996, this program is no longer for investors as the property must be owner-occupied for at least 3 years.
General Requirements of the 203(k) Loan Program
- Owner Occupied- You must live in the property for a minimum of three years after the rehabilitation is complete.
- Minimum Level of Rehab - Want to know if your project qualifies? Request a free estimate from New City and include information on the type of property you are looking to rehab and its current condition.
- Mortgage Limitation - You may only have 4 total mortgages in your name, including your 203(k) mortgage.
- Property Standards - You must comply with HUD’s minimum property standards.
- Loan to Value - The loan to value cannot exceed 100% of appraised value of the property after construction is completed.
Eligible Improvements Under the 203(k) Loan Program
- Conversion of a single family property for multifamily use
- Roofing, gutters, and downspouts
- Structural alterations and reconstruction
- Flooring
- Improved function and modernization Major landscape or site improvement
- Energy-conservation improvements
- Accessibility for people with disabilities
- Elimination of health and safety hazards Attached additions
- Aesthetic upgrades
- Plumbing, electrical, HVAC upgrades and repairs
HUD prohibits “luxury” improvements under the 203(k) program. To determine if your project has “luxury” components, contact us.
Why New City for 203(k)?
The 203(k) renovation process is unique, so many contractors are not set-up to handle these kinds of projects. The 203(k) Loan Program demands detailed estimates, a strict bank-approval process for contractors, extensive planning and scheduling, and up-front costs that must be covered by the contractor.
With your home's quality on the line and carrying costs accruing during construction, you want a company that has experience with the 203(k) process. New City can efficiently and effectively complete everything from your feasibility estimate and bank qualifications to the actual construction project. New City can also provide you with referrals to qualified real estate and mortgage professionals.
Next Steps
1. Contact New City to discuss your goals and objectives.
2. Locate a potential property, using your agent or a real estate consultant referred to you by New City.
3. Get pre-approved by a mortgage company participating in the 203(k) Program. New City has relationships with quality lenders you can use.
4. Schedule a feasibility analysis with a licensed 203(k) consultant. New City can refer you to a qualified consultant.
5. Execute a sales contract on the property.
6. Schedule a free estimate with New City.
7. Execute a construction contract with New City.
8. Obtain a property appraisal. This will be based on the value after construction is completed.
At this point, you are ready to go to settlement and then begin construction.