FHA 203(K)….OK….What Improvements Are Required?

Mortgage and Lending with Greenville, NC

 Your have located the fixer-upper that you want to buy or you are preparing to repair/rehabilitate your existing home. You are now preparing your feasibility analysis for the repairs and rehabilitation with your real estate professionals.


 HUD has required improvements that must be included to be eligible for FHA 203(k) financing. What are these required improvements you ask? Here is a list:


FHA 203(k) required improvements:

  • Weather strip all doors and windows if existing weather-stripping is inadequate
  • Caulk or seal all openings. Cracks, or joints in the building to reduce air infiltration
  • Insulate all openings in exterior walls where the cavity has been exposed as a result of the rehabilitation
  • Insulate ceiling areas where necessary
  • Adequately ventilate attic and crawl space areas
  • Each sleeping area must be provided with at least one approved smoke detector
  • If replacing heating and air systems the supply and return pipes and ducts must be insulated when they run through unconditioned spaces
  • HVAC systems must be sized to be no greater than 15% oversized
  • Work performed must conform with local codes


Idea for listing agents representing distressed properties:

Consult with local contractors and develop a repair/rehabilitation estimate as part of your marketing efforts



Watch for upcoming posts

Eligible improvements

Ineligible improvements


Previous posts on the FHA 203(k)program

You Want To Buy A Fixer-Upper…OK…203(k)

FHA 203(k) A Loan Program Poised For Revival


Jay Williams




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Comments (7)

Mark Watterson
Salt Lake City, UT
Utah Real Estate

I don't know many lender that know much about the 203(k) even in the secondary market.  Every-time I ask a question it goes into the black hole.  So I look forward to your upcoming posts to learn more....

Jan 10, 2009 12:45 AM
Jay Williams
Greenville, NC - Greenville, NC
Mortgage Loan Officer - Getting You The Right Loan

Mark, you are correct in that most lenders are inexperienced with the program. One of the advantages I see in the blogging experience is that it causes you to sharpen your skills.

Welcome and I am looking forward to your coming back.



Jan 10, 2009 02:04 AM
Matt Peters
RE/MAX Premiere - Albuquerque, NM
(New Mexico Broker)

Wells Fargo has a good "renovation loan program" including FHA 203k mortgages. In the Albuquerque Rio Rancho Market (New Mexico) the renovation loans are handled by a specialty office for that purpose.

Anyone dealing with distressed property should have an experienced "ready and willing" lender for 203k mortgages.

Jay's list of "needed repairs" is a bit more superficial than mine.  Possibly, the REO properties I see using renovation financing are a bit more needy.

1. Roof must be leak free and possibly certified.

2. Broken or missing windows, doors, plumbing fixtures and electrical fixtures need to be replaced.

3. Interior and exterior surfaces need to be in "serviceable condition" including carpet, vinyl and other flooring.

4. etc.

I usually ask the lender's appraiser to do a preliminary walk-through with me, and identify needed repairs with "blue tape".  Then we get a contractor to run through with a bid.  The Buyer(s) often have a few items on their "wish list" to add to those required to qualify for FHA financing.  I have done quite a few FHA 203k sales, one was a MFG Home that needed a new well pump and a "permanent foundation" retrofit.  Most common major item has been roof replacement and sheet-rock repair required by roof leakage.

Over the years FHA requirements for property condition have changed quite a bit.  There are definitely differences in interpetation from appraiser to appraiser and probably significant differences from area to area.  Generally the home needs to be complete (nothing missing) and functional (nothing significant broken). 

Matt Peters, REO Specialist in New Mexico http://www.IdealNM.com   

Jan 10, 2009 06:44 AM
Franklin & Brentwood, TN Homes Mike Nastri
Keller Williams Realty - Franklin, TN
It matters to us as much as it matters to you.

Jan 10, 2009 07:08 AM
Jay Williams
Greenville, NC - Greenville, NC
Mortgage Loan Officer - Getting You The Right Loan

Matt, We handle our renovation loans through a specialty office as well. I applaud you for being proactive in developing your repair/rehabilitation worksheets. Many prospective buyers and their agents have not developed anything. Which is one of the purposes for this series of posts.



Jan 10, 2009 09:51 AM
Eleanor Thorne
Equity Resources - Cary, NC
Equity Resources 919-649-5058

Jay - this is a complicated program - and I highlighted it in NC Week in Review!

Jan 13, 2009 12:12 AM
Jay Williams
Greenville, NC - Greenville, NC
Mortgage Loan Officer - Getting You The Right Loan

Eleanor, thank you. I'm honored you've highlighted this post

Jan 13, 2009 10:22 PM