What to Know About the FHA 203(k) Program Updates

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On November 4, 2024, the U.S. Department of Housing and Urban Development (HUD) is implementing several significant updates to the FHA 203(k) renovation programs. These updates aim to modernize the program, making it more accessible and efficient for homebuyers and homeowners looking to finance necessary renovations.

Key Updates

Increased Financing Limits

Under the Limited 203(k) program, the cap for rehabilitation costs will rise from $35,000 to $75,000. The HUD is optimistic that this change will allow for more extensive repairs. Additionally, there will be an annual review of this limit to ensure the program keeps pace with inflation.

Extended Rehabilitation Timeframes

Borrowers using the Limited 203(k) program will have 9 months to complete their repairs and renovations, up from the previous 6 months. Standard 203(k) borrowers will have a total of 12 months to complete repairs, offering owners more flexibility in managing larger projects.

Financing Consultant Fees Update

Consultant fees are critical for services such as inspections and feasibility studies, but they previously hadn’t been updated since 1995. Consultants may now charge $1,000 for projects that cost less than $50,000. For projects exceeding $140,000, consultants can charge as much as $2,000 or up to 1% of the total mortgage cost. The HUD aims to attract more qualified consultants to participate in the 203(k) program.

Financing Consultant Fees Roll-in

The program update will provide the ability to finance consultant fees as part of the mortgage, easing some of the upfront financial costs for borrowers.

Renovations That Align with Your Needs

These updates are designed to better align the FHA 203(k) program with current market conditions while also incentivizing those looking to purchase or refinance their homes that may require rehabilitation. The HUD hopes that extended rehab timelines and increased financial support will revitalize homes in neighborhoods where affordable housing stock requires repairs. To discover if you qualify for an FHA 203(k) rehabilitation, contact us today!