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Are there extra fees involved with an FHA 203(k) Loan?
     The borrower will pay the same fees normally associated with an FHA loan.  Contact Community Mortgage for more details on those extra costs. 
In addition, other costs    mayinclude: 

  • Fees charged by the HUD consultant (initial inspections and re-inspections during the renovation project by contractors, etc.)
  • Interest rate is typically 1/8%-1/2% more than traditional FHA loans
  • a 15% contingency reserve (usually only for the Rehab version) based on the repair/improvement amount to cover any potential unforeseen expenses or unknown conditions. (This is financed into the loan amount = A $5,000 repair will result in $750 in a contingency fund)

What is a contingency reserve?
    A contingency reserve is a 15% of the repair/renovation amount and its purpose is in case of any unforeseen costs that arise. Any monies saved or not spent may be used as a one-time principle balance reduction in the mortgage amount at the end of the project. 


Can I do the work myself?
    No,  you must hire a licensed certified contractor on a standard 203(k) loan.  On a Streamline,  you will hire 2 or 3 specialized contractors (heating and air, electrical, and carpentry work, etc) doing uncomplicated projects.


Can an investor use the FHA 203(k) Loan?
    No. This is for primary residence borrowers only.


How soon can we close?
    Your 203(k) closing is as timely as any other loan program. You should be in a position to close within 30-45 days after loan application.  Would recommend a 60 day contract on a HUD REO property.


Is there a time limit for completing the renovations after closing?
    Yes. You have up to 6 months to complete the work.

    Additionally, there are two important time frames you should be made aware:

  • The work can begin right after closing or begin sometime within the 30 days after the loan closing.
  • Work can not stop for more than 30 consecutive days prior to completion.

Can any contractor be a part of a 203(k) loan?
    Any Licensed contractor can participate with the FHA 203k:

  • The borrower is responsible for selecting and hiring whichever licensed contractor they want to renovate their home. There cannot be any conflict of interest between the borrower and the contractor — No family nor financial relationship.
  • HUD/FHA does not have an approved contractors list. If you would like to participate in the 203(k) program as a contractor, please contact CMC.
  • Community Mortgage Corp. will not select your contractor (please refer back to bullet #1)
  • However, CMC and the HUD consultant are responsible that the selected contractor is licensed and acceptable to do the 203(k) project. They must be able to finish the renovations in a timely and workmanlike manner and in accordance with HUD’s guidelines.
  • Insurance, Workman's comp and 3 references will be requested of new contractors.




Information cited from and HUD.