Which FHA 203(k) Home Loan should you choose - Limited or Standard?

You've found a home in a neighborhood where you've always wanted to live. And you can snatch it up at a good price. So what's stopping you? Could it be the outdated appliances, dark brown exterior, and wall-to-wall carpeting? It might not be your dream home just yet, but with an FHA 203(k) renovation loan, it could be.

There are many ways to finance a home construction projects but the two versions of the FHA 203k program have emerged as a popular choice among today’s home buyers and homeowners wishing to make home improvements, especially when they don’t own the home yet.


The two FHA programs are known as the Standard 203k, and the Limited 203k.

With this loan you can purchase the property and get the extra funds you need to remodel, repair, and renovate. It's unique because you can borrow the funds you'll need based on what your house is expected to be worth after the renovation is complete. 

(The 203(k) can also be used to refinance your current home and make renovations.) 

The FHA 203(k) loan is insured by the Federal Housing Administration (FHA), and offers two options: Limited and Standard. Finding the one that's right for you depends on how much you want to spend and what you intend to do. 

The differences between the Limited 203(k) and the Standard 203(k) Structural Repairs:

LIMITED: Minor remodeling and non-structural repairs. 

STANDARD: Major rehabilitation or when repairs are structural or involve landscaping. Examples include jacking up your house to replace the sill plate or knocking the house down to rebuild it (you must leave the foundation). HUD Consultant. 

LIMITED: Does not require a HUD consultant. 

STANDARD: Requires the use of a HUD consultant. He will draw up the paperwork and work with you and your contractors to get a write-up before the appraisal and ensure the required renovation is completed. (Your loan officer can work with you to obtain the services of an experienced HUD-approved 203(k) consultant). Cost. 

LIMITED: Total renovation costs cannot exceed $35,000. There are no minimum costs. 

STANDARD: Your repairs and renovations can go above $35,000. There is a minimum repair cost of $5,000. 

Eligible repairs you can make with a Limited 203(k) Repairing or replacing the roof, gutters or downspouts Repairing or replacing HVAC, heating, plumbing, or electrical systems Repairing or replacing flooring Minor remodeling Indoor or outdoor painting Replacing appliances Accessibility upgrades Abatement of lead-based paint Repairing or replacing decks, patios, and porches Waterproofing or finishing a basement Weatherization Eligible repairs you can make with a Standard 203(k) Plumbing, electrical, heating, and cooling improvements Structural changes Storm shelter additions Appliance and HVAC upgrades Roofing alterations Large landscaping and site improvements Sewage and septic improvements Site conversion (from a single unit to multi-unit property, for example) Site relocation Accessibility upgrades Of course, there are other nuances that differentiate the Standard from the Limited. 

Which 203k Loan Should I Choose?

The two 203(k) programs also vary in what type of work can be performed. The FHA program guidelines include a comprehensive list.

This is the work which is allowed via the FHA 203(k) Limited:

• Repair/replacement of roofs, gutters and downspouts
• Repair/replacement/upgrade of existing HVAC systems
• Repair/replacement/upgrade of plumbing and electrical systems
• Repair/replacement of existing flooring
• Minor remodeling which does not involve structural repairs
• Exterior and interior painting
• Weatherization of windows and doors, insulation, weather stripping.
• Purchase and installation of appliances
• Improvements for accessibility for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair, replacement or the addition of exterior decks, patios, and porches
• Basement remodeling which does not involve structural repairs
• Basement waterproofing
• Window and door replacement and exterior siding replacement
• Well or septic system repair or replacement

And, this is the work allowed via the FHA 203(k) Standard:

• Major rehabilitation, such as the relocation of a load-bearing wall
• New construction, including room additions
• Repair of structural damage
• Repairs requiring detailed drawings or architectural exhibits
• Landscaping or similar “site amenity” improvement
• Any repair requiring a work schedule longer than three (3) months; or rehabilitation activities that require more than two (2) payments per specialized contractor
• Improvements that require a plan reviewer
• Improvements that result in work not starting within 30 days after loan closing; or cause the owner to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted

As a recap, the Limited lives up to its name — less paperwork for the borrower, easier for the lender to approve, and a simplicity in the draw schedule. The Standard 203(k) is meant for “bigger jobs.”

Both loans can be a great option for those looking to buy and rehabilitate before moving in the house.

If you have more questions, or want something concrete in your hands, give us a call. CMG is ranked as one of the top FHA 203(k) lenders in the nation.

 *This is not a commitment to lend. Not all borrowers will qualify; contact us for more information on fees and terms.

You don't have to wait 3 years to buy a home

Hello All
We have had some pretty exciting news recently from HUD. The new mortgagee letter allows for 12 month seasoning for a foreclosure, Bankruptcy CH 7, CH 13 or a short sale on a new FHA purchase loan.  (Not the usual waiting period of 3 years)

Effective case numbers assigned on or after August 15,2013 through Sept 30, 2016---Borrowers must meet all other applicable FHA eligibility and policy criteria.

Borrower Eligibility:

Borrowers that may be otherwise ineligible for an FHA-insured mortgage due to FHA's waiting period for bankruptcies, foreclosures, deeds-in-lieu, and short sales, as well as delinquencies and/or indication of derogatory credit, including collections and judgments, may be eligible for an FHA-insured mortgage if the borrower:Economic Event- any occurrence beyond the borrower's control that results in Loss of Employment, Loss of Income, or a combination of both, which causes a reduction in the borrower's Household Income of twenty (20) percent of more of a period of at least six (6) months.Onset of an Economic Event- the month of Loss of Employment/Income.  Recovery from an Economic Event- the re-establishment of Satisfactory Credit for a minimum of twelve (12) monthsAttend Housing Counseling

NOTE: Foreclosures, deeds-in-lieu, Short Sales and Bankruptcies require that 12 months have elapsed since the date of the derogatory item (i.e. date of sale for a short sale, discharge date for a bankruptcy. etc).

Housing Counseling:

To qualify under the guidelines of the Mortgage Letter, borrowers, co-borrowers and Non-Occupant borrowers must:- Receive homeownership counseling or a combination of homeownership education and counseling provided that each participant receives, as a minimum , one hour of one-on-one counseling from HUD-Approved housing counseling agencies- The counseling must address the cause of the economic even and the actions taken to overcome the economic event and reduce the likelihood of reoccurrence. The housing education may be provided by HUD-approved housing counseling agencies, state housing finance agencies, approved intermediaries or their sub-grantees, or through an on line course.

Note: Counseling must be completed a minimum of thirty (30) days but no more than six (6) months prior to application. Housing counseling may be conducted in person, via telephone, via internet, or other methods approved by HUD.Housing counseling may be conducted in person, via telephone, via internet, or other methods approved by HUD. 

A list of agencies can be obtained online at www.hud.gov/counselingservices

Your fico score will still determine if Standard FHA guidelines or FHA Portfolio guidelines will be followed. Any questions please let us know.

Aundrea Beach-Greco

The Beach-Greco Team

NMLS 333739
(702) 326-7866
info@aundreabeach.com