The U.S. Department of Housing & Urban Development (HUD), through the Federal Housing Administration (FHA), has published a newly updated set of policies for its 203(k) Rehabilitation Mortgage Insurance Program.
The changes announced in Mortgagee Letter 2024-13 will modernize the program and enhance its usefulness for individuals and families seeking affordable financing for renovating or rehabilitating a single-family home when purchasing or refinancing it.
Re-investing in the nation’s housing stock
The 203(k) program allows borrowers to use FHA-insured financing to include the cost of rehabilitation or repair in a single mortgage used to purchase or refinance a home. The program covers structural repairs such as foundations and new roofs, modernization of kitchens and bathrooms, and projects to increase energy efficiency and climate resilience.
“HUD has programs not only to help families purchase a house, but to help them repair their homes,” said HUD Acting Secretary Adrianne Todman. “Today, we are modernizing and expanding this program, helping both homebuyers and homeowners fix up their homes. This is one more action the HUD and the Biden-Harris Administration is taking to improve our country’s housing supply.”
FHA offers two variations of the 203(k) program: the Standard 203(k), which may be used for substantial remodeling and repairs, and the Limited 203(k), which may be used for minor remodeling and nonstructural repairs. The new enhancements modify both programs, and include:
- Increasing the allowable total rehabilitation costs a borrower can finance under the Limited 203(k) program from $35,000 to $75,000 and reviewing this limit annually to ensure it continues to keep pace with market conditions;
- Providing more time for rehabilitation and repair work to be completed by extending the rehabilitation period to 12 months for the Standard 203(k) and nine months for the Limited 203(k);
- Allowing the financing of the 203(k) Consultant Fee in the total mortgage amount for the Limited 203(k) if a borrower chooses to use a 203(k) Consultant; and
- Increasing the allowable fees that a 203(k) Consultant can charge for various activities, which have not been updated since 1995. The new fee structure is designed to appropriately compensate Consultants for their role and encourage more Consultants to participate in the program.
“The changes we are announcing today for the 203(k) program are long overdue and will support greater use of this program where it is needed most–in neighborhoods where homes are affordable but need repair,” said Federal Housing Commissioner Julia Gordon. “Increased use of 203(k) mortgages will help modernize and revitalize homes, which supports affordable housing supply and strengthens neighborhoods.”
HUD made the announcement with Philadelphia Mayor Cherelle Parker at the home of Kasan Simmons in Philadelphia, a borrower who used the FHA 203(k) program to finance renovations to his home.
“Thanks to this crucial program, I was able to make renovations to my home,” said Simmons. “I’m ecstatic to see that HUD and the Biden-Harris Administration are making improvements to enhance and expand this program, so thousands more homeowners can make fixes to their homes.”
Click here for more information on HUD’s Mortgagee Letter 2024-13.
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