Repairs, Updates, and Green Renovations with the 203k Mortgage Program

Purchasing a home that needs some repairs or updating has become less popular in today's economy. House flippers are not as active as they had been in years past due to the downward trend in real estate. Many individual home buyers worry about budget restrictions and the possibility of purchasing a home that needs repairs only to find themselves short on funds needed to complete those repairs. The 203k program is a mortgage option available to qualifying home buyers that can help eliminate those worries. The 203k mortgage also provides home buyers an option for adding green products to the home. Using a 203k mortgage and green renovations to make your new home a green home can not only add value but save money.

The 203k mortgage allows home buyers to get approved for the home purchase and the repair costs up front. Homeowners who use the 203k mortgage option are able to select a contractor to complete repairs needed. Some buyers may also have the option of completing some repairs themselves based on program guidelines. In many 203k transactions there are also consultants involved. These consultants act as an independent third party to be sure the work is done properly and the contractor gets paid accordingly. This can make the process much smoother and limit some common home improvement transaction disputes. With a 203k mortgage the homeowner is not responsible for handling the payments to the contractor and the contractor deals directly with the consultant or mortgage company for all payments. This eliminates some of the homeowner headaches involved. The home buyers basically have an inspection done that determines all of the required repairs, the buyer also makes an application for any requested updates or repairs. The contractor submits a quote for all of the work to be done and the mortgage company includes this quote in the application. If the mortgage is approved along with the amount of the repairs then the contractor, consultant, and buyer sign a contract for services. The mortgage lender will hold a portion of money for repairs in escrow and release it to the contractor upon completion of work. Many times in larger home improvement projects the contractor can draw from this for portions of the project that are complete. If you need to find a local contractor you can use Angie's List to find qualified contractors in your area to complete your home improvement project. Angie's List service providers can be found in almost any city, check to see if there is a local contractor in your area that meets the quality standards of Angie's List.

A. Structural repairs and reconstruction: Additions such as an added bath(s), finished attic or basement space, repair of pest or insect damage and treatment to prevent further damage, etc.

B. Changes to improve function or modernization: Updating appliances, bathroom fixtures, kitchen fixtures, or other areas that can improve the overall functionality and use of the home.

C. Eliminating health or safety issues: This can include removing defective or lead based paint, repairing damaged or inoperable sewage and waste systems or any other hazards.

D. Changes to add appeal to the appearance: Things like new siding, adding an upper level, adding a porch or covering an existing, adding stair railings, etc.

E. Replacing or reconditioning plumbing: This can include adding connections to public water or sewage systems, HVAC systems, even installation of new fixtures such as bathtubs is acceptable.

F. Installing a well or septic system: This installation if included in your 203k mortgage must be completed before any other property repairs or upgrades can be performed. There are many guidelines for this particular area, it is best to contact your mortgage officer or HUD for specific details. Refer to HUD Handbook 4910.1, Appendix K, for additional information.

G. Installing or repairing gutters, roofing, or downspouts.

H. Installation or repair of Flooring: This can include tile, carpet, wood, laminate or any other HUD and FHA approved flooring.

I. Improvements to aid in energy conservation: Installing new energy efficient windows, doors, HVAC, or water heating systems. Many alternative energy products like solar preheating systems qualify.

J. Major site improvements or landscaping: Adding or repairing a patio, deck, proper land grading, correcting drainage problems etc. This can also include seeding a new lawn or installing plants for erosion control.

K. Disabled accessibility Improvements: Adding wheel chair ramps, widening door ways, lowering cabinets as well as adding fixtures and appliances that are designed for handicap accessibility and use.

Contact a real estate agent or mortgage company to find out more details about the 203k mortgage program. Whether you are buying a fixer upper or just buying a home that needs some energy efficient updates to make it a green home, the 203k program can be a great option. This program is also government insured much like other HUD and FHA loans.