203(k) & Bank Loans
Many Washington, DC and Maryland homeowners aren’t aware they can buy and fix up a home with one loan. If you’re purchasing what’s commonly called a “fixer-upper,” an FHA 203(k) rehab loan allows you to make your home move-in ready by doing things like remodeling, painting, and purchasing new flooring. Optimum Construction is a certified 203(k) contractor that can help you navigate the red tape of obtaining a 203(k) and keep your project running on time and on budget.
What Is an FHA 203(k) Rehab Loan?
FHA 203(k) loans are basically the same as regular FHA 203(b) loans but with a twist. With an FHA 203(k), you’re permitted to include repair and improvement funds in your mortgage and use it to upgrade, improve, or repair the home you’re buying. There are two types of FHA 203(k) loans:
- Standard loans that are more like a construction project
- Limited loans for minor improvements
The maximum loan amount for each type of loan depends on where your property is located.
FHA 203(k) loans can be used for dwellings of 1-4 units, including:
- Single-family detached
- Mixed-use residential (with certain restrictions)
- Condominiums (with certain restrictions)
While 203(k) loans have more hurdles to clear than standard bank loans, they can be an excellent tool when buying a home that has potential or for making repairs or upgrades to your current home.
How Does an FHA 203(k) Rehab Loan Work?
FHA guidelines for 203(k) loans require that the general contractor performing the work on your home be skilled and licensed to do such work. The work must also be done in a timely and workmanlike manner. For these reasons, most lenders require a professional contractor to perform the work.
The list of covered repairs, modifications, and renovations for an FHA 203(k) loan is extensive. Each improvement must add value to and/or improve the property and comply with local codes and ordinances as well as HUD’s minimum property standards. Some examples of covered work include:
- Energy-efficiency upgrades, including windows, solar, and insulation
- Improving or replacing HVAC, electrical, and plumbing systems
- Kitchen remodeling
- Structural repairs and modifications such as moving walls or repairing foundations
- Accessibility improvements for persons with disabilities
The paperwork for a 203(k) loan is a bit more complicated than regular loans and must be completed in a specific way to avoid rejection or complications. A certified 203(k) construction loan contractor can help ensure your paperwork is filled out properly.
The Role of a Certified 203(k) Contractor
There is no such thing as an FHA-approved remodeling or general contractor. Instead, HUD/FHA allows borrowers to hire whichever contractor they want and requires lenders to determine if the selected contractor is acceptable for 203(k) work. Contractors can complete the 203(k) Contractor Certification Program and then present their certificate to lenders to verify their understanding and knowledge of FHA 203(k) loans.
Optimum Construction has extensive experience working with the requirements of an FHA 203(k) loan and knows firsthand what the program requires. To learn more about FHA 203(k) loans or to start the loan process, contact us online today to call us at (240) 422-9990.
“Phase 1 of our renovation is done! Thank you Omar & crew! Great work, amazing speed & professionalism. We are thrilled with the progress & so happy we found…”-Glenn & Lisa
“After several pensive weeks, our move was successful! We had a lot of renovating to do, so we contacted Omar from Optimum Construction who was a true professional! He…”-Nikki & Mike
“Awesome work these people do. They painted our home and we get a lot of compliments for their job. Man Cave will be in the works next. Thanks Optimum…”-Roy & Marianne
“Optimum Construction completely remodeled my 1950's kitchen and bathroom. Both look great and they'll be doing my other bathroom and flooring as well. LIKE”-Curtis Berg
“Since moving into our home a year ago we have wanted to complete the garden level bedroom and bathroom. They framed both rooms, installed drywall, electrical, carpeting, painted, installed…”-Dan & Nelson
“8 months we almost sold our home. Not happy with the space, the master bathroom, or empty basement we dreamed of selling and building. Fortunately for us, the market…”-Gustavo & Theodora Limon
“We were fortunate to get a free estimate from Omar at Optimum Construction and the experience has changed my impression of contractors forever. This was a level of professionalism…”-Bim & Lola