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


  1. Are Section 203(k) home rehab loans restricted to single-family dwellings? No. The program can be used for one-to-four unit dwellings.
  2. Can Section 203(k) home rehab loans be used to improve condos? Yes, however, condo rehab is subject to certain conditions. See eligible condos for a home rehab loan.
  3. Can the rehab loans be used to convert a one family dwelling to a two-, three-, or four-family dwelling (or vice versa)? Yes.
  4. Can the loans be used to move an existing house onto another site? Yes, however, release of loan proceeds for the existing structure on the non-mortgaged property is not allowed until the new foundation has been properly inspected and the dwelling has been properly placed and secured to the new foundation. At closing, funds would be released to purchase the site and the rest of the mortgage proceeds would be placed in the Rehab Escrow Account. The borrower would have the site prepared to accept the dwelling. The first release would be based on the improvements made to the site, including the installation of the existing structure on the new foundation.
  5. What is the minimum amount of rehab required for a Section 203(k) home mortgage? There is a minimum $5,000 requirement for the eligible improvements on the existing structure on the property. Minor or cosmetic repairs by themselves are unacceptable; however, they may be added to the minimum requirement.
  6. What eligible improvements are acceptable under the $5,000 minimum requirement? See eligible home improvements.
  7. Can a detached garage or another dwelling be placed on the mortgaged property? Yes, however, a new unit must be attached to the existing dwelling, and must comply with HUD's Minimum Property Standards and all local codes and ordinances.
  8. Is there a time period on the rehab construction period? Yes, the Rehab Loan Agreement contains three provisions concerning the timeliness of the work. The work must begin within 30 days of execution of the Agreement. The work must not cease prior to completion for more than 30 consecutive days. The work is to be completed within the time period shown in the Agreement (not to exceed six months); the lender should not allow a time period longer than that required to complete the work.
  9. Does HUD always require a contingency reserve to cover unexpected cost increases? Typically, yes. On homes older than 30 years and over $7,500 in rehab costs, the cost estimate must include a contingency reserve. The reserve must be a minimum of ten (10) percent of the cost of rehab; however, the contingency reserve may not exceed twenty (20) percent where major remodeling is contemplated. If utilities were not turned on for inspection, a minimum fifteen (15) percent is required.
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