There are Two Different Types of 203(k) Loans:
The reason for the different names is there are 2 types FHA 203(k) loans:
The “Streamlined or Limited 203(k)” is for more cosmetic type upgrades up to $35,000 and then there is the “Full 203(k)” version where it’s mandatory you use a 203(k) Consultant and is used for more expensive and involved rehab, repairs and renovation and can include extensive structural repair, room additions, kitchen remodels as well as cosmetic changes like painting, etc.
The Standard 203(k)
Referred to as the Full 203(k) and is intended for more complicated projects that can involve structural changes such as room additions, exterior grading and landscaping. A “Full 203(k) is also used if your project requires engineering or architectural drawings and inspections. One benefit with this form of the 203(k) is that a single family property may be converted into a two, three or four-unit dwelling or vice versa so long as the owner occupies one of the units.
The Limited or Streamlined 203(k)
The 203(k) Streamlined Loan is designed primarily for cosmetic upgrades that will not exceed a total of $35,000 in renovation and related expenses. This version does not require the use of a consultant, architect, and engineer NOR as many inspections as the Standard 203(k) does. With only a few additional steps, the Steamlined 203(k) is a popular option when a typical FHA loan is considered since upgraded flooring, new carpet, paint, new light fixtures or kitchen appliances seem to be the easiest way to quickly turn an outdated house into a dream home.
Either way, we’ll reference both versions as the general “FHA 203(k)” program to keep things simple throughout our explanations on this site. The FHA 203(k) Loan (Streamline 203k or the FULL 203k) fills a gap and helps the buyer or homeowner who will be the primary resident ……. not an absentee investor or landlord …. upgrade and improve their property and help maintain the integrity of the property values and housing stock in their neighborhood.