Need a remodeling home loan? Think 203k loan.

Picture credit Michelle Meiklejohn

At a networking event a contractor told me that his business was way down this year because obtaining financing or an equity loan is so difficult these days.  He still gets big jobs like room additions but the smaller jobs that keep him afloat between the big jobs is almost non-existent.

The contractor had never heard of the 203k loan.  When I briefly explained it to him he said “why aren’t more people using the 203k loan as a remodeling home loan “?  I explained that most people don’t know about it and the Realtor community isn’t receptive to it.  I did also mention that the loan is different from the normal conventional loan and that may be the main reason why it scares off some Realtors and consumers.  People shy away from things out of their comfort zone.

The contractor than said that he has several smaller jobs that want to start their remodel but just don’t have the money or they can’t qualify for a cash out refinance loan to do it.  I mentioned that the 203k loan can be done as a refinance cash out loan and that the consumer can finance a bit more than 95% of the value of their home and pull out the cash for the remodel.

The remodel funds would be controlled by an escrow account to ensure the monies go toward the remodel and not toward buying a car or paying off debt.  I went on to say that the 203k Streamline loan does the smaller remodeling jobs and the borrower can get up to $35,000 out of the home with this loan.  I continued by saying the Standard 203k does the bigger remodel jobs that the 203k Streamline can’t do.

I did point out that the 203k Standard loan isn’t prevalent on refinance loans since there are limitations as far as how much in funds you can get versus the value of the home, so it isn’t always cost effective.  However when when using the 203k Standard loan to purchase a home, that limitation is not in effect, so adding on a bathroom, bedroom or garage is permitted as long as it fits the neighborhood characteristics.

The 203k Streamline can be used for both refinances and when purchasing a home to do the cosmetic, smaller jobs.  After the quick explanation, I could see dollar signs in the contractors eyes.  “This loan could put alot of people back to work and pump some energy back into our economy”, he said.  I agreed. “Now it’s just getting the word out”.  I again agreed.

I did have to remind him that there are two different 203k loans, the Standard 203k and the 203k Streamline.  Two loans that can be used as a remodeling home loan, with each loan serving a different purpose.  One for big jobs, one for smaller cosmetic jobs.  I cautioned him also in that this is not an end all be all remodeling loan and that if the consumer had questions they should do some research or go to my website for more information to make sure these loans fit their need.

We parted amicably and felt that I had done my good deed for the day in giving someone hope and needed information that can be used to get their business thriving once again.   Our economy is driven by real estate.  If 203k loans were used more often as a type of remodeling home loan it would indeed put more people back to work in many different industries.

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  1. Posted November 28, 2010 at 6:49 pm | Permalink

    Hi Kevin. This contractor you mention should get properly educated on the 203k. This can be achieved by going through the 203k Contractor Certification Program at

  2. Felicia
    Posted May 30, 2011 at 3:26 pm | Permalink

    How does the 203K Loan help homeowners that need repairs and underwater on their mortgage? If my house is appraised for less then what I owe on it will I still be able to get help with much needed repairs?

  3. Posted May 31, 2011 at 5:51 pm | Permalink

    Hello Felicia, if you are under water (owing more than the home is currently valued), the 203k can not be used on a refinance. The maximum loan to value is 97%. Unfortunately you can only exceed the property value when using the 203k loan to purchase a home.

  4. kevim smith
    Posted August 17, 2011 at 4:56 pm | Permalink

    If I purchase a home for cash, can I get a loan ti just make repairs

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