If you’re thinking of working with the most popular rehab loan program on the market today, the FHA 203K Loan, keep in mind that the project’s repair items will be labeled under three types or categories of repair.
- Recommended
- Mandatory
- Desired
Let’s look at how they differ and see that, under HUD’s Guidelines, some repair items aren’t allowed at all.
Recommended
Repairs listed as recommended are those suggested by professionals who have either inspected your project by choice [usually a Professional Home Inspector] or as a result of a recommendation by your 203(k) Consultant or Professional Home Inspector. A few examples are:
- an engineer’s inspection of the structure
- a home inspector’s evaluation of the property
- a 203(k) consultant’s findings
- an architect’s view of the building and it’s layout/floor plan
Mandatory
Mandatory repairs are just as they sound, those which are required under HUD 203(k) Guidelines for the rehab loan. An example might be a 203(k) Consultant’s inspection of the attic that reveals inadaquate levels of insulation or a safety hazard such as the absence of smoke and fire detection devices/alarms. HUD’s 203(k) Guidelines includes an inspection of the FHA Minimum Housing Standards and a host of health and safety, energy usage and site specific design characteristics.
Desired
Desired repairs or additions usually include the borrower’s ideas and needs. This “wish list” usually includes color choices, textures and product brands. For instance, the owner’s choice to demo kitchen counter tops and install Granite would be considered a desired repair item. But, keep in mind, not all desired items fall under the “approved items” list. The 203(k) Loan does not allow the purchase or construction of luxury items such as custom make barbecue pits, swimming pools or painted murals.
Contact a 203(k) Consultant for more information and guidance through the rehab. Find a national map for FHA Approved 203(k) Consultants here.