The FHA 203k program provides you with many renovation options. We receive several calls/emails each week from people inquiring about what exactly the FHA 203k can be used for. In this post I am going to cover four of the more popular renovation items that come to mind. Remember that there are additional uses for the FHA 203k which I will cover in future posts.
Can I add…
1. Additional rooms? Recently a woman called and asked me if she could add on multiple rooms to her house including a master suite over a garage.
My answer was and will always be YES. We have a lot of homeowners who would prefer to stay in their homes due to preferable neighborhoods and school districts, but would love to add more space. In this instance we look at doing 203k’s from a refinance standpoint. The 203k loan can be used for both refinance and purchase transactions. You can expand the footprint of the home by adding rooms and additional square footage both on top and out of the sides of an existing home. Keep in mind that you must meet all local codes and variances when adding square footage.
2. New septic system? Probably the most overlooked renovations revolve around installing a new septic system or repairing an existing one. In many areas they are not common, but for properties utilizing septic, problems may arise. Septic systems can be burdensome because you cannot close a deal with a faulty system. The 203k only works because you are allocating the renovation monies to fix the septic system. The FHA 203k is a perfect solution to this problem, because it allows for the septic system to be fixed after closing is complete.
Often times people are unsure how much repairing the septic system will cost. In those instances we would finance the worst case scenario and if the cost ends up totaling less then we put the money back against principal or they can make a change order and use it for other repairs.
3. Swimming pool? By far one of the most popular questions involves the installation of swimming pools.
The answer is NO. The FHA 203k program does not allow for the installation of swimming pools, although it can provide up to $1,500 to repair a pool for safety reasons. Past borrowers have used the $1,500 for a good safety pool cover to help bring the property up to FHA standards. They later have opted to either repair the pool or fill it in with cement.
The loan will not close if the property is not up to FHA safety standards, so utilizing the $1,500 pool repair budget for a safety cover is a recommended option.
4. New kitchen? Lastly, I have done many, many projects where the borrower just wanted to revamp the kitchen. They either were looking at a house that had an outdated kitchen or were currently living in a house with one that had not been updated since the 70’s!
Many people are now inspired by shows on HGTV in which the kitchens are defined by a very open style. The 203k covers it all when it comes to the kitchen. You can blow out a wall and open it toward the dining room, you can install a large island, you can add a new range and/or range hood, and you can upgrade all of your kitchen appliances to the newest stainless steel editions!
That covers some of the more popular inquiries about the 203k. I will cover other questions in the future. For now, if you have any specific questions about the FHA 203k, make sure to leave a comment below.