FHA 203k Loan Primary Residence rules during rehab

Jacksonville, FL · Member since 2019 · 10 posts · 3 votes

I understand the FHA 203k allows one to buy a Primary residence with a low downpayment and wraps the rehab costs into the loan. My question is what are the rules regarding the timeline to begin living in the home after the rehab?

I am in a year long lease that'll end in July of next year and would still love to be able to take advantage of this loan. Would it be possible to purchase a home in say April of next year and because of the rehab not move in until July?

Thanks in advance!

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Paul Welden

Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes

@Michael Noto that is NOT correct. The standard 203k allows 6 months to complete the rehab but there is NO timeline for when the borrowers must physically move into the property.

@Devin Collins there is no timeline or specified date when the borrower must physically move in to the property for an FHA 203k loan.

Reference HUD SFR Handbook 4000.1

@Corey White there are some lenders that have altered their rehab loans, such as Flagstar, which has temporarily suspended the Standard 203k but is still doing the Limited 203k. Other banks have stopped 203k correspondent channels but most other banks/lenders are full steam ahead on the 203k.

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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
6y
@Devin Collins

The FHA 203k loan system is unique and full of pros and cons. I found a website that describes a lot it in detail. I'm not sure on the credibility of the site but it matches what I've read on BP numerous times.

https://www.fool.com/millionacres/real-estate-financing/203k-loans/

Limited 203k is move in within 60 days and standard 203k is 6 months. I don't want to discourage you from using this type of loan, but be sure to ask questions at the bank. Some of them have little experience doing the 203k loans.
1 Reply
Matthew PorcaroBusiness Member
Lender · Long Island, NY · Member since 2016 · 456 posts · 336 votes
6y
Originally posted by @Devin Collins:
I understand the FHA 203k allows one to buy a Primary residence with a low downpayment and wraps the rehab costs into the loan. My question is what are the rules regarding the timeline to begin living in the home after the rehab?
I am in a year long lease that'll end in July of next year and would still love to be able to take advantage of this loan. Would it be possible to purchase a home in say April of next year and because of the rehab not move in until July?
Thanks in advance!

No one is waiting outside your door seeing when you actually move your stuff into the inside. Everyone's situation is different. If your lease ends at a certain time, you can begin moving in. But for all intents and purposes this new residence will be your primary. If it takes you some time to move out of the old lease and into the new, and you're still paying your mortgage on time every month and your lender knows you can afford your rent AND your mortgage, you should be fine.

The 203k Way
Website View Page
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Paul Welden
Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
6y
@Devin Collins Although the traditional FHA loan (FHA 203b) has a requirement for the primary borrower to occupy the property within 60 day of closing, The FHA 203k does not have a requirement where the primary borrower is required to physically occupy the property. However, FHA loans, including the 203k, do have a requirement that the primary borrower intends to occupy the property as their primary residence.

Both versions of the 203k, Standard and Limited, allow up to 6 months to complete the rehab and the actual rehab time approved can be less as determined by the 203k Consultant or Certified 203k Contractor or the lender.

@Jaron Walling Thank you for sharing the link to that article, which is pretty good, but there is some misinformation or confusing information in it, such as:
- The initial step by step did not include the HUD 203k Consultant (only included later on in the article)
- Contractors are not paid by the HUD 203k Consultant - The HUD 203k Consultant, along with the borrower, approve/disapprove the contractor's draw request, which is sent to the lender, who then releases the approved money to pay the contractor (typically a 2 party check sent to the borrower)
- Limited 203k does NOT require the borrower to live in the property during renovations; the Limited 203k requires that the renovations cannot cause the borrower to be displaced from the property for more than 15 days during the rehab, but the borrower can certainly choose to live elsewhere during the rehab
- The Standard 203k does NOT allow the borrower to finance rent or housing payments; the Standard 203k allows the borrower to include up to 6 months of the property's mortgage (PITI) into the loan
- The article says the Standard 203k will not let you live in the property during rehab, but that is not true; the borrower can certainly live in the property during the rehab
Overall, a decent article but felt the need to clarify a few items. (Reference HUD SFR 4000.1)
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Devin Collins
OP
Jacksonville, FL · Member since 2019 · 10 posts · 3 votes
6y
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Devin Collins
OP
Jacksonville, FL · Member since 2019 · 10 posts · 3 votes
6y
I didn't think of that, makes sense!
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Devin Collins
OP
Jacksonville, FL · Member since 2019 · 10 posts · 3 votes
6y
Originally posted by @Paul Welden:
@Devin Collins Although the traditional FHA loan (FHA 203b) has a requirement for the primary borrower to occupy the property within 60 day of closing, The FHA 203k does not have a requirement where the primary borrower is required to physically occupy the property. However, FHA loans, including the 203k, do have a requirement that the primary borrower intends to occupy the property as their primary residence.

Both versions of the 203k, Standard and Limited, allow up to 6 months to complete the rehab and the actual rehab time approved can be less as determined by the 203k Consultant or Certified 203k Contractor or the lender.

@Jaron Walling Thank you for sharing the link to that article, which is pretty good, but there is some misinformation or confusing information in it, such as:

The initial step by step did not include the HUD 203k Consultant (only included later on in the article)
Contractors are not paid by the HUD 203k Consultant - The HUD 203k Consultant, along with the borrower, approve/disapprove the contractor's draw request, which is sent to the lender, who then releases the approved money to pay the contractor (typically a 2 party check sent to the borrower)
Limited 203k does NOT require the borrower to live in the property during renovations; the Limited 203k requires that the renovations cannot cause the borrower to be displaced from the property for more than 15 days during the rehab, but the borrower can certainly choose to live elsewhere during the rehab
The Standard 203k does NOT allow the borrower to finance rent or housing payments; the Standard 203k allows the borrower to include up to 6 months of the property's mortgage (PITI) into the loan
The article says the Standard 203k will not let you live in the property during rehab, but that is not true; the borrower can certainly live in the property during the rehab

Overall, a decent article but felt the need to clarify a few items. (Reference HUD SFR 4000.1)
Thank you for the specificity, so does that mean as long as I intend to move into it at some point it's okay? Or is 6 months the limit?
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Paul Welden
Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
6y
@Devin Collins 6 months the limit for what? Rehab? move in date? ???
1 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
6y
@Devin Collins You have 6 months to move in if you are using a standard 203k loan. Based on the timeline you provided you should be good.
0 Reply
Devin Collins
OP
Jacksonville, FL · Member since 2019 · 10 posts · 3 votes
6y
@Paul Welden move in date
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Devin Collins
OP
Jacksonville, FL · Member since 2019 · 10 posts · 3 votes
6y
@Michael Noto thanks!
0 Reply
Corey White
Specialist · Miami, FL · Member since 2014 · 12 posts · 3 votes
6y
@Devin Collins Have you already started talking with lenders? I’m curious how the pandemic has affected 203k loans specifically.
0 Reply
Paul Welden
Real Estate Agent · Tempe, AZ · Member since 2011 · 1k+ posts · 543 votes
6y
@Michael Noto that is NOT correct. The standard 203k allows 6 months to complete the rehab but there is NO timeline for when the borrowers must physically move into the property.

@Devin Collins there is no timeline or specified date when the borrower must physically move in to the property for an FHA 203k loan.

Reference HUD SFR Handbook 4000.1

@Corey White there are some lenders that have altered their rehab loans, such as Flagstar, which has temporarily suspended the Standard 203k but is still doing the Limited 203k. Other banks have stopped 203k correspondent channels but most other banks/lenders are full steam ahead on the 203k.
4 Reply
Corey White
Specialist · Miami, FL · Member since 2014 · 12 posts · 3 votes
6y
@Paul Welden thank you for the insight!
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