“Great news for 203(k) professionals and homeowners! HUD’s Mortgagee Letter 2024-13 brings major updates to the 203(k) Rehabilitation Mortgage Insurance Program, including a significant raise for consultants—the first in over 30 years.
Effective November 4, 2024, consultants may now charge the following fees for preparing the Work Write-Up and reviewing architectural exhibits:
- Up to $1,000 fee for repairs of $50,000 or less
- Up to $1,200 fee for repairs between $50,001 and $85,000
- Up to $1,400 fee for repairs between $85,001 and $140,000
- Up to 1% of repair costs or $2,000 (whichever is lower) for repairs over $140,000
- Limited 203(k) borrowers can now finance consultant fees into the mortgage, reducing out-of-pocket costs.
- On the program side, the Limited 203(k) rehab cost cap has increased from $35,000 to $75,000, with the rehab period extended to 9 months (up from 6).
- For Standard 203(k), rehab time now spans 12 months, with mortgage payment reserves matching that duration. These updates make the 203(k) program more flexible and rewarding for consultants and borrowers alike!”
Major Program Totals and Changes:
Limited 203(k) Rehab Cost Increase:
The maximum rehabilitation cost for the Limited 203(k) has increased from $35,000 to $75,000, aligning it with inflation and modern repair costs (unchanged since 2005). This applies nationwide, with annual reviews tied to FHA’s Nationwide Forward Mortgage Loan Limits.
Standard 203(k) Rehab Period Extension:
The allowable rehabilitation period for Standard 203(k) loans has been extended from 6 months to 12 months, accommodating more complex projects.
Limited 203(k) Rehab Period Extension:
The rehab period for Limited 203(k) loans has increased from 6 months to 9 months, offering more flexibility for less extensive repairs.
Mortgage Payment Reserve Period (Standard 203(k)):
For Standard 203(k) loans, the mortgage payment reserve period—covering payments when the property is uninhabitable during rehab—has increased from 6 months to 12 months.
Occupancy Delay Threshold (Limited 203(k)):
The timeframe before repairs are considered “major” (impacting occupancy) in Limited 203(k) loans has doubled from 15 days to 30 days, reducing restrictions on borrowers.
These changes occur for FHA case numbers assigned on or after November 4, 2024.
Are you ready to start your rehab project?
Download, sign, and return my fee agreement. Afterward, contact me with your rehab details. I need the following to help you get started:
- The subject property address.
- The contact information from:
- You
- Your lender
- Your contractor
- Your real estate agent (if working with one)
- If you have a contractor’s bid, send it to me. IMPORTANT: Your bid must fit the 35 categories in this form. Each line item will need to be broken into Materials and Labor. Do not send a bid in any other format. For example, the bid should not be in lump sum.
- Here is an example of a lump sum line item,
- Flooring: $2,000
- This is a line item broken into material and labor.
- Flooring: $1,000 labor / $1,000 material.
- Here is an example of a lump sum line item,
TIP: It’s best to send the bid using spreadsheet software.
Once I have this information, I will need to visit the property for:
- A preliminary inspection
- Compare the scope of work with your bid (if you have one already).
- A meeting to help you prepare the scope of work (if you don’t already have a contractor’s bid).
- Re-read number 3 from above.
- The contractor and you should be present at this first meeting. We will need to discuss draws and inspections during the rehab work.
Please call me to discuss anything that does not fit the above scenarios. 601-454-5559