Eligible Properties

• Specific criteria are used in determining what types of houses may be mortgaged under a 203k FHA loan. One- to four-family homes are often financed under this program. Other eligible properties include razed or demolished homes that still have a foundation, and conversion of single-family homes to multifamily units and vice versa.
  
  

Condo Conditions

• Condominium units must meet specific conditions for 203k FHA loans. They must be in a condo project that has been approved by the FHA or the Department of Veterans Affairs. The condo must be owner-occupied or for a non-profit borrower, only interior upgrades and repairs are permitted, only 5 units or 25 percent of condo units can have rehabilitation projects going on within a project, and the mortgage amount is limited to 100 percent of the value of the condo post-improvement.
  
  

Loan Use

• There are three uses for a 203k FHA loan. You can use the loan to buy a house and land and rehabilitate the property; you can buy a house on one property, move it to a new property (and foundation) and rehabilitate it; or you can use a 203k loan to refinance a house that is mortgaged, and get funds to repair or rehabilitate it.
  
  

Allowed Improvements

• There are two types of improvements: eligible and required. Eligible improvements are improvements that are not required to make the property habitable but are covered under the 203k program. Examples include painting, decks, or room additions. Required improvements include weatherstripping, insulation, ventilation, replacement of heating or cooling systems if needed, and smoke detectors near bedrooms.
  
  

Loan Limits

• Loan limits differ depending on whether a borrower is refinancing into a 203k FHA loan, or making a purchase.
  
  Refinancing limits are the current mortgage on the house plus rehabilitation funds, or as-is value and rehabilitation, or 110 percent of post-improvement value.
  
  For purchase loans, the maximum loan value is determined by as-is or listing cost of the home, plus rehab funds, or 110 percent of post-rehabilitation value.