FAQs - Frequently Asked Questions
Home Rehab Loans (Section 203k)


  1. How many draw releases can be scheduled during the rehab period? As many as five releases (four plus a final) can be scheduled. The number of releases is normally dictated by the cash-flow requirements of the contractor. An inspection is always required with a scheduled release; however, inspections may be scheduled more often than releases if necessary to ensure compliance with the architectural exhibits, HUD's Minimum Property Standards and all local codes and ordinances. If the cost of rehab exceeds $10,000, then additional draw inspections may be authorized under certain circumstances.
  2. Can the architectural exhibits, including the cost estimate, be modified after the rehab mortgage loan is closed? Yes. The changes must be approved by HUD or a DE lender prior to beginning the work. If the change affects the health, safety or necessity of the dwelling, the contingency reserve can be used to pay for the change. However, if the health, safety or necessity of the dwelling is not affected and an increase in cost occurs, the borrower must apply monies into the contingency reserve fund to pay for the change. Should the change result in a reduced cost of rehab, the difference will be placed in the contingency reserve fund; if unused, it will be applied as a mortgage prepayment after completion of construction.
  3. What happens if the cost of the rehab increases during the rehab period? Can the rehab mortgage loan amount be increased to cover the additional expenses? No. This emphasizes the importance of carefully selecting a contractor who will accurately estimate the cost of the improvements and satisfactorily complete the rehab at or below the estimate.
  4. How long will it take after the sales contract is signed to go to closing? If the cost estimates are completed within two weeks of signing the sales contract, the rehab loan should close within 60 to 90 days, assuming there are no title problems and, of course, your borrower is qualified.
  5. Can a Section 203(k) mortgage be an Adjustable Rate Mortgage? Yes. An Adjustable Rate Mortgage is available to an owner-occupant only.
  6. Can an investor use the 203(k) rehab loan program? No. In October, 1996, the Department placed a moratorium on investor participation in the 203(k) Rehab Mortgage Program.
  7. Can a local government agency or a nonprofit organization use the 203(k) rehab program? Yes. The same qualification equirements will be used as for an owner-occupant of the property
Back   Next
The information provided in this website is not legal advice and should not be interpreted as legal advice. This website is intended to provide a basic understanding of this information in summary form. This information may not be comprehensive, is subject to change, and may not apply to all individual circumstances. Any information received here should be confirmed with the appropriate government agencies or with an attorney, particularly as it relates to your individual circumstances. Your use of this website indicates your agreement to be bound by our Terms of Use.