source:
  type: guide
  id: hud-4000-1-ii-8-programs-and-products-203-k-rehabilitation-mortgage-insuranc
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — 8. Programs and Products - 203(k)
    Rehabilitation Mortgage Insurance Program (04/10/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — 8. Programs and Products -
    203(k) Rehabilitation Mortgage Insurance Program (04/10/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-8-programs-and-products-203-k-rehabilitation-mortgage-insuranc-full
  canonical_id: hud-4000-1-ii-8-programs-and-products-203-k-rehabilitation-mortgage-insuranc-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II
  description: "Programs and Products - 203(k) Rehabilitation Mortgage Insurance Program: 8. Programs\
    \ and Products \na. 203(k) Rehabilitation Mortgage Insurance Program (04/10/2025) \nThe Section 203(k)\
    \ Rehabilitation Mortgage Insurance Program is used to: \n• rehabilitate an existing one- to four-unit\
    \ Structure, which will be used primarily \nfor residential purposes; \n• rehabilitate such a…"
  type: do
  tags:
  - regulator-direct
  - section-complete
  - hud
  - 4000-1
  - curated
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — 8. Programs and Products -
      203(k) Rehabilitation Mortgage Insurance Program (04/10/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: "8. Programs and Products \na. 203(k) Rehabilitation Mortgage Insurance Program (04/10/2025)\
      \ \nThe Section 203(k) Rehabilitation Mortgage Insurance Program is used to: \n• rehabilitate an\
      \ existing one- to four-unit Structure, which will be used primarily \nfor residential purposes;\
      \ \n• rehabilitate such a Structure and refinance outstanding indebtedness on the \nStructure and\
      \ the Real Property on which the Structure is located; \n• purchase and rehabilitate a Structure\
      \ and purchase the Real Property on which the \nStructure is located; or \n• rehabilitate the interior\
      \ space of an eligible Condominium Unit excluding any \nareas that are the responsibility of the\
      \ Condominium Association. \nStructure refers to a building that has a roof and walls, stands permanently\
      \ in one place, \nand contains single or multiple housing units that are used for human habitation.\
      \ For \n203(k) Rehabilitation Mortgage eligibility, a one-family dwelling unit in a multi-unit \n\
      Condominium Project may be considered a single-unit Structure and a townhouse in \ntownhouse-style\
      \ condominium may be considered a single-unit Structure provided each \ntownhouse-style unit is\
      \ separated by a one and one-half hour firewall from foundation to \nroof. \nMortgages to be insured\
      \ under Section 203(k) must be processed and underwritten in \naccordance with the requirements\
      \ in Origination through Post-closing/Endorsement, \nexcept where noted otherwise in this section.\
      \ \n(A) Types of 203(k) Rehabilitation Mortgages \nThere are two types of 203(k) Rehabilitation\
      \ Mortgages: Standard 203(k) and Limited \n203(k), as described below. The guidance in this section\
      \ is applicable to both \nStandard 203(k) and Limited 203(k) Mortgages unless noted otherwise. \n\
      (1) Standard 203(k) \nThe Standard 203(k) Mortgage may be used for remodeling and repairs. There\
      \ is a \nminimum repair cost of $5,000 and the use of a 203(k) Consultant is required. \n(2) Limited\
      \ 203(k) \nThe Limited 203(k) may only be used for minor remodeling and nonstructural \nrepairs.\
      \ The Limited 203(k) does not require the use of a 203(k) Consultant, but a \nConsultant may be\
      \ used. The total rehabilitation costs must not exceed $75,000. \nThe Limited 203(k) total rehabilitation\
      \ cost limit will be evaluated on an annual \nbasis in conjunction with the process undertaken for\
      \ the establishment of FHA’s \nNationwide Forward Mortgage Loan Limits. If it is determined that\
      \ an increase to \n\n \nthe Limited 203(k) loan limit is warranted, the new limit will be announced\
      \ \nconcurrent with the publication of the Nationwide Forward Mortgage Loan Limits \nannouncement.\
      \ \n(B) Eligible Supplemental Programs and Products \nA 203(k) Mortgage may be used in conjunction\
      \ with the following: \n• Energy Efficient Mortgages \n• Solar and Wind Technologies \nThe Borrower\
      \ must meet the eligibility requirements found in the Borrower Eligibility \nsection, and the additional\
      \ guidance provided here related to nonprofit agency Borrowers. \nThe Mortgagee must verify and\
      \ document the nonprofit agency Borrower’s caseload. The \nMortgagee must review the Nonprofit List\
      \ in FHA Connection (FHAC), and ensure the \nmaximum 203(k) case load limitation is not exceeded\
      \ for nonprofit Borrowers. \n(A) Rental Income Received from the Subject Property \nIf the subject\
      \ Property is a one-unit with an Accessory Dwelling Unit (ADU) and the \nBorrower does not have\
      \ a history of Rental Income from the subject Property since \nthe previous tax filing, to calculate\
      \ the Effective Income the Mortgagee must use 50 \npercent of the lesser of: \nMortgagees must apply\
      \ this requirement for both Mortgages underwritten through \nTOTAL Scorecard and manual underwriting.\
      \ \niii. Property Eligibility \nThe Property must be an existing Property that has been completed\
      \ for at least one year \nprior to the case number assignment date. If the Mortgagee is unsure whether\
      \ the \nProperty has been completed for at least one year, the Mortgagee must request a copy of\
      \ \nthe Certificate of Occupancy (CO) or equivalent. \nA Property that is not eligible for a 203(b)\
      \ Mortgage due to health and safety or security \nissues may be eligible under 203(k) if the rehabilitation\
      \ or repair work performed will \ncorrect such issues. \nA Property with an existing 203(k) Mortgage\
      \ is not eligible to be refinanced until all \nrepairs are completed and the case has been electronically\
      \ closed out. \n\n \nThe following property types may be financed: \n• a one- to four-unit Single\
      \ Family Structure, including a Condominium Unit; \n• a Site Condominium unit; \n• Manufactured\
      \ Housing where the rehabilitation does not affect the structural \ncomponents of the Structure\
      \ that were designed and constructed in conformance \nwith the Federal Manufactured Home Construction\
      \ and Safety Standards and \nmust comply with all other requirements for Manufactured Housing; \n\
      • a Mixed Use Property with one- to four-residential units, provided: \no 51 percent of the Gross\
      \ Building Area (GBA) is for residential use; and \no commercial use will not affect the health\
      \ and safety of the occupants of the \nresidential Property; and \n• a HUD Real Estate Owned (REO)\
      \ Property: \no the Property is identified as eligible for 203(k) financing as evidenced in the\
      \ \nsales contract or addendum. Investor purchases of HUD REO Properties are \nnot eligible for\
      \ 203(k) financing. \n(A) Dwelling Unit Limitation \nA Mortgagee may determine that units in a neighborhood\
      \ are not subject to the \nDwelling Unit Limitation of no more than seven Dwelling Units within\
      \ a two block \nradius when: \n• the neighborhood has been targeted by a state or local government\
      \ for \nredevelopment or revitalization; \n• the state or local government has approved and submitted\
      \ a plan to HUD \ndescribing the program of neighborhood redevelopment and revitalization, \nincluding\
      \ the geographic area targeted for redevelopment, and the nature and \nproportion of public or private\
      \ commitments that have been made in support \nof the redevelopment; \n• the nonprofit agency borrower\
      \ will own no more than 10 percent of the \nDwelling Units (regardless of financing type) in the\
      \ designated redevelopment \narea; and \n• the nonprofit agency borrower will have no more than\
      \ eight Dwelling Units \non adjacent lots. \nThe Mortgagee must review the approved redevelopment\
      \ plan to ensure that the units \nin which the nonprofit agency has or will have a financial interest\
      \ are located within \nthe targeted geographic area. The Mortgagee must also review public records\
      \ to \ndetermine that the agency does not exceed the limitations on the number of units that \n\
      they may own in the redevelopment area, and that they have no more than eight \nadjacent units.\
      \ \nThe Mortgagee must obtain the following documentation: \n• a copy of the redevelopment plan;\
      \ and \n• evidence that the state or local government approved the plan. \n\n \nThe Mortgagee must\
      \ submit the documentation to HUD in the case binder. \niv. Application Requirements \nThe Mortgagee\
      \ must provide the Borrower with the form HUD-92700-A, 203(k) \nBorrower’s Acknowledgement. \nv.\
      \ Case Number Assignment Data Entry Requirements \nIn order to request a case number for a 203(k)\
      \ Mortgage, the Mortgagee must enter the \n(A) 203(k) Program Type Indicator \nThe Mortgagee must\
      \ select either Standard 203(k) or Limited 203(k) as the program \ntype. \n(B) Consultant Selection\
      \ and Identification Number \n(1) Consultant Selection \nThe use of a 203(k) Consultant is required\
      \ for a Standard 203(k) Rehabilitation \nMortgage. The Limited 203(k) Mortgage does not require\
      \ the use of a 203(k) \nConsultant, but a Consultant may be used. \nWhen using a Consultant, the\
      \ Mortgagee must select an FHA-approved 203(k) \nConsultant that is active on the FHA 203(k) Consultant\
      \ Roster for the state in \nwhich the Property is located. \nThe Mortgagee must not use the services\
      \ of a 203(k) Consultant who has \ndemonstrated previous poor performance based on reviews conducted\
      \ by the \n(2) Consultant Identification Number \nThe Mortgagee must enter the Consultant identification\
      \ number into the \n“Consultant ID” field on the Case Number Assignment screen in FHAC. For a \n\
      Limited 203(k) with no Consultant, the Mortgagee must enter “203KS” in the \n“Consultant ID” field.\
      \ \n(C) Automated Data Processing Code \nThe Mortgagee must enter the appropriate 203(k) Automated\
      \ Data Processing (ADP) \ncode. \n\n \n(D) Construction Code \nThe Mortgagee must enter “Substantial\
      \ Rehabilitation” in the drop-down menu \nlabeled “Construction Code.” \n(E) Refinance Type \nFor\
      \ a refinance transaction, the Mortgagee must select “Not Streamlined” in the dropdown menu labeled\
      \ “All Refinances.” \n(F) Converting From a Non-203(k) to a 203(k) Mortgage \nIf the Mortgagee had\
      \ originally requested the case number assignment for a non203(k) Mortgage, the Mortgagee must update\
      \ the existing case data in the Case \nNumber Assignment screen, changing the ADP Code to a valid\
      \ 203(k) ADP Code \nand the “Construction Code” to “Substantial Rehabilitation.” \nvi. Standard\
      \ 203(k) Transactions \n(A) Standard 203(k) Eligible Improvements \nThe Standard 203(k) requires\
      \ a minimum of $5,000 in eligible improvements. \n(1) Types of Improvements \nTypes of eligible\
      \ improvements include, but are not limited to: \n• converting a one-family Structure to a one-family\
      \ Structure with an ADU, \ntwo-, three-, or four-family Structure; \n• adding an Accessory Dwelling\
      \ Unit (ADU) that will be attached to an \nexisting Structure; \n• renovating an existing ADU that\
      \ is attached or unattached to an existing \nStructure; \n• decreasing an existing multi-unit Structure\
      \ to a one- to four-family \nStructure; \n• reconstructing a Structure that has been or will be\
      \ demolished, provided \nthe complete existing foundation system is not affected and will still\
      \ be \nused; \n• repairing, reconstructing, or elevating an existing foundation where the \nStructure\
      \ will not be demolished; \n• purchasing an existing Structure on another site, moving it onto a\
      \ new \nfoundation, and repairing/renovating it; \n• making structural alterations such as the repair\
      \ or replacement of structural \ndamage, additions to the Structure, and finished attics and/or\
      \ basements; \n• rehabilitating, improving, or constructing a garage; \n• eliminating health and\
      \ safety hazards that would violate HUD’s Minimum \nProperty Requirements (MPR); \n\n \n• installing\
      \ or repairing wells and/or septic systems; \n• connecting to public water and sewage systems; \n\
      • repairing/replacing plumbing, heating, AC, and electrical systems; \n• making changes for improved\
      \ functions and modernization; \n• making changes for aesthetic appeal; \n• repairing or adding\
      \ roofing, gutters, and downspouts; \n• making energy conservation improvements; \n• creating accessibility\
      \ for persons with disabilities; \n• installing or repairing fences, walkways, and driveways; \n\
      • installing a new refrigerator, cooktop, oven, dishwasher, built-in \nmicrowave oven, and washer/dryer;\
      \ \n• repairing or removing an in-ground swimming pool; \n• installing smoke detectors; \n• making\
      \ site improvements; \n• landscaping; \n• installing or repairing exterior decks, patios, and porches;\
      \ \n• constructing a windstorm shelter; and \n• covering lead-based paint stabilization costs, if\
      \ the Structure was built \nbefore 1978, in accordance with the Single Family mortgage insurance\
      \ \nlead-based paint rule (24 CFR §§ 200.805 and 200.810(c)) and the U.S. \nEnvironmental Protection\
      \ Agency’s (EPA) Renovation, Repair and \nPainting Rule (40 CFR Part 745, especially subparts E\
      \ and Q). \n(2) Improvements Standards \n(a) General Improvement Standards \nAll improvements to\
      \ existing Structures must comply with HUD’s MPR and \nmeet or exceed local building codes. For\
      \ a newly constructed addition to the \nexisting Structure, the energy improvements must meet or\
      \ exceed local codes \nand the requirements of the latest energy code standard that has been adopted\
      \ \nby HUD through a Federal Register notice. \n(b) Specific Improvement Standards \nAny addition\
      \ of a Structure unit must be attached to the existing Structure. \nSite improvements, landscaping,\
      \ patios, decks and terraces must increase the \nAs-Is Property Value equal to the dollar amount\
      \ spent on the improvements or \nbe necessary to preserve the Property from erosion. \n(B) Standard\
      \ 203(k) Ineligible Improvements/Repairs \nThe 203(k) mortgage proceeds may not be used to finance\
      \ costs associated with the \npurchase or repair of any luxury item, any improvement that does not\
      \ become a \n\n \npermanent part of the subject Property, or improvements that solely benefit \n\
      commercial functions within the Property, including: \n• recreational or luxury improvements, such\
      \ as: \no swimming pools (existing in-ground swimming pools can be repaired) \no an exterior hot\
      \ tub, spa, whirlpool bath, or sauna \no barbecue pits, outdoor fireplaces or hearths \no bath houses\
      \ \no tennis courts \no satellite dishes \no tree surgery (except when eliminating an endangerment\
      \ to existing \nimprovements) \no photo murals \no gazebos; or \n• additions or alterations to support\
      \ commercial use or to equip or refurbish \nspace for commercial use. \n(C) Standard 203(k) Establishing\
      \ Repairs and Improvements \nThe Mortgagee must select an FHA-approved 203(k) Consultant from the\
      \ FHA \n203(k) Consultant Roster in FHAC. The Mortgagee must not use the services of a \nConsultant\
      \ who has demonstrated previous poor performance based on reviews \nperformed by the Mortgagee.\
      \ The Consultant must inspect the Property and prepare \nthe Work Write-Up and Cost Estimate. The\
      \ Mortgagee must verify that the name \nshown in the 203(k) Consultant’s Certification matches the\
      \ selected 203(k) \nConsultant. \nThe Work Write-Up refers to the report prepared by a 203(k) Consultant\
      \ that \nidentifies each Work Item to be performed and the specifications for completion of \nthe\
      \ repair. \nCost Estimate refers to a breakdown of the cost for each proposed Work Item, \nprepared\
      \ by a 203(k) Consultant. \nWork Item refers to a specific repair or improvement that will be performed.\
      \ \nException for Borrowers Doing Own Work \nFor Borrowers performing their own work under a Rehabilitation\
      \ Self-Help \nAgreement, the Consultant must identify on the Work Write-Up each Work Item to \n\
      be performed by the Borrower. The Borrower must not be reimbursed for labor costs. \n(D) Standard\
      \ 203(k) Financeable Repair and Improvement Costs and Fees \nThe following repair and improvement\
      \ costs and fees may be financed: \n• costs of construction, repairs and rehabilitation; \n• architectural/engineering\
      \ professional fees; \n\n \n• the 203(k) Consultant fee subject to the limits in the 203(k) Consultant\
      \ Fee \nSchedule section; \n• inspection fees performed during the construction period, provided\
      \ the fees \nare reasonable and customary for the area; \n• title update fees; \n• permits; and\
      \ \n• a Feasibility Study, when necessary to determine if the rehabilitation is \nfeasible. \nAny\
      \ costs for Energy Efficient Mortgages and Solar Energy Systems must not be \nincluded in financeable\
      \ repair and improvement costs. \nFor Borrowers performing their own work, the Mortgagee must include\
      \ the costs for \nlabor and materials for each Work Item to be completed by the Borrower under a\
      \ \nRehabilitation Self-Help Agreement. \n(E) Standard 203(k) Financeable Contingency Reserves \n\
      Contingency Reserve refers to funds that are set aside to cover unforeseen project \nThe Mortgagee\
      \ must refer to the following chart to determine when a Contingency \nReserve is required. The minimum\
      \ and maximum Contingency Reserve is established \nas a percentage of the financeable repair and\
      \ improvement costs. \nFor Structures with an actual age of less than 30 years: \n \nRequired when\
      \ evidence of \ntermite damage \nDiscretionary \nNo Minimum \nFor Structures with an actual age\
      \ of 30 years or more: \n \nRequired when utilities are \nnot operable as referenced \nin the Work\
      \ Write-Up \n15% \nThe Borrower may provide their own funds to establish the Contingency Reserves.\
      \ \nWhere the Borrower has provided their own funds for Contingency Reserves, they \nmust be noted\
      \ under a separate category in the Repair Escrow Account. \n\n \n(F) Standard 203(k) Financeable\
      \ Mortgage Payment Reserves \nA Mortgage Payment Reserve refers to an amount set aside to make Mortgage\
      \ \nPayments when the Property cannot be occupied during rehabilitation. \nA Mortgagee may establish\
      \ a financeable Mortgage Payment Reserve, not to exceed \n12 months of Mortgage Payments. The Mortgage\
      \ Payment Reserve may include \nMortgage Payments only for the period during which the Property\
      \ cannot be \noccupied. The number of Mortgage Payments cannot exceed the completion time \nframe\
      \ required in the Rehabilitation Loan Agreement. \nFor multi-unit Properties, if one or more units\
      \ are occupied, the Mortgage Payment \nReserve may only include the portion of the Mortgage Payment\
      \ attributable to the \nunits that cannot be occupied. To calculate the amount that can be included\
      \ in the \nMortgage Payment Reserve, the Mortgagee will divide the monthly Mortgage \nPayment by\
      \ the number of units in the Property and multiply that figure by the \nnumber of units that cannot\
      \ be occupied. The resulting figure is the amount of the \nMortgage Payment that will be paid through\
      \ the Mortgage Payment Reserve. The \nBorrower is responsible for paying the servicing Mortgagee\
      \ the portion of the \nMortgage not covered by the Mortgage Payment Reserve. \n(G) Standard 203(k)\
      \ Financeable Mortgage Fees \nThe Mortgagee may finance the following fees and charges. \n(1) Origination\
      \ Fee \nThe Mortgagee may finance a portion of the Borrower-paid origination fee not to \nexceed\
      \ the greater of $350, or 1.5 percent of the total of the financeable repair and \nimprovement costs\
      \ and fees, financeable Contingency Reserves, and financeable \nMortgage Payment Reserves. \nThe\
      \ Mortgagee may finance a portion of the Borrower-paid Discount Points not to \nexceed an amount\
      \ equal to the discount point percentage multiplied by the total of \nfinanceable repair and improvement\
      \ costs and fees, financeable Contingency \nReserves, and financeable Mortgage Payment Reserves.\
      \ \n(H) Standard 203(k) Required Documentation and Review \n(1) Review of Contractor Qualifications\
      \ \nPrior to closing, the Mortgagee must ensure that a qualified general or specialized \ncontractor\
      \ has been hired and, by contract, has agreed to complete the work \ndescribed in the Work Write-Up\
      \ for the amount of the Cost Estimate and within \nthe allotted time frame. To determine whether\
      \ the contractor is qualified, the \n\n \nMortgagee must review the contractor’s credentials, work\
      \ experience and client \nreferences, and ensure that the contractor meets all jurisdictional licensing\
      \ and \nbonding requirements. \n(2) Consultant’s Work Write-Up and Cost Estimate \nThe Mortgagee\
      \ must obtain the Consultant’s Work Write-Up and Cost Estimate \nfor all Standard 203(k) Mortgages.\
      \ The Mortgagee must ensure the Work WriteUp/Cost Estimate specifies the type of repair and cost\
      \ of each Work Item. The \nMortgagee must review the Work Write-Up and ensure that all health and\
      \ safety \nissues identified were addressed before, including additional Work Items. \n(3) Architectural\
      \ Exhibits \nThe Mortgagee must obtain and review all applicable architectural exhibits. \n(4) Sales\
      \ Contract \nThe Mortgagee must ensure the sales contract includes a provision that the \nBorrower\
      \ has applied for Section 203(k) financing, and that the contract is \ncontingent upon mortgage\
      \ approval and the Borrower’s acceptance of additional \nrequired improvements as determined by\
      \ the Mortgagee. \nWhen the Borrower is financing a HUD REO Property, the Mortgagee must \nensure\
      \ that the first block on Line 4 of form HUD-9548, Sales Contract Property \nDisposition Program,\
      \ is checked, as well as the applicable block for 203(k). \nvii. Limited 203(k) Transactions \n\
      (A) Limited 203(k) Eligible Improvements \nThe Limited 203(k) may only be used for minor remodeling\
      \ and nonstructural repairs. \nThe total rehabilitation costs may not exceed $75,000. \n(1) Types\
      \ of Improvements \nEligible improvement types include, but are not limited to: \n• eliminating\
      \ health and safety hazards that would violate HUD’s MPR; \n• repairing or replacing wells and/or\
      \ septic systems; \n• connecting to public water and sewage systems; \n• repairing/replacing plumbing,\
      \ heating, AC, and electrical systems; \n• making changes for improved functions and modernization;\
      \ \n• eliminating obsolescence; \n• repairing or installing new roofing, provided the structural\
      \ integrity of the \nStructure will not be impacted by the work being performed; siding; \ngutters;\
      \ and downspouts; \n• making energy conservation improvements; \n\n \n• creating accessibility for\
      \ persons with disabilities; \n• installing or repairing fences, walkways, and driveways; \n• installing\
      \ a new refrigerator, cooktop, oven, dishwasher, built-in \nmicrowave oven, and washer/dryer; \n\
      • repairing or removing an in-ground swimming pool; \n• installing smoke detectors; \n• installing,\
      \ replacing or repairing exterior decks, patios, and porches; and \n• covering lead-based paint\
      \ stabilization costs (above and beyond what is \npaid for by HUD when it sells REO properties)\
      \ if the Structure was built \nbefore 1978, in accordance with the Single Family mortgage insurance\
      \ \nlead-based paint rule and EPA’s Renovation, Repair and Repainting Rule. \n(2) Improvements Standards\
      \ \n(a) General Improvement Standards \nAll improvements to existing Structures must comply with\
      \ HUD’s MPR and \nmeet or exceed local building codes. \n(b) Specific Improvement Standards \nPatios\
      \ and decks must increase the As-Is Property Value equal to the dollar \namount spent on the improvements.\
      \ \n(B) Limited 203(k) Ineligible Improvements/Repairs \nThe Limited 203(k) mortgage proceeds may\
      \ not be used to finance major \nrehabilitation or major remodeling. FHA considers a repair to be\
      \ “major” when any of \nthe following are applicable: \n• the repair or improvements are expected\
      \ to require more than nine months to \ncomplete; \n• the rehabilitation activities require more\
      \ than two payments per specialized \ncontractor; \n• the required repairs arising from the appraisal:\
      \ \no necessitate a Consultant to develop a specification of repairs/Work WriteUp; or \no require\
      \ plans or architectural exhibits; or \n• the repair prevents the Borrower from occupying the Property\
      \ for more than a \ntotal of 30 Days during the rehabilitation period. \nAdditionally, the Limited\
      \ 203(k) mortgage proceeds may not be used to finance the \nfollowing specific repairs: \n• converting\
      \ a one-family Structure to a two-, three- or four-family Structure; \n• decreasing an existing\
      \ multi-unit Structure to a one- to four-family Structure; \n• reconstructing a Structure that has\
      \ been or will be demolished; \n• repairing, reconstructing or elevating an existing foundation;\
      \ \n\n \n• purchasing an existing Structure on another site and moving it onto a new \nfoundation;\
      \ \n• making structural alterations such as the repair of structural damage and New \nConstruction,\
      \ including room additions; \n• landscaping and site improvements; \n• constructing a windstorm\
      \ shelter; \n• making additions or alterations to support commercial use or to equip or \nrefurbish\
      \ space for commercial use; and/or \n• making recreational or luxury improvements, such as: \no\
      \ new swimming pools; \no an exterior hot tub, spa, whirlpool bath, or sauna; \no barbecue pits,\
      \ outdoor fireplaces or hearths; \no bath houses; \no tennis courts; \no satellite dishes; \no tree\
      \ surgery (except when eliminating an endangerment to existing \nimprovements); \no photo murals;\
      \ or \no gazebos. \n(C) Limited 203(k) Establishing Repair and Improvement Costs \nThe Borrower\
      \ must submit a Work Plan to the Mortgagee and use one or more \ncontractors to provide the Cost\
      \ Estimate and complete the required improvements and \nrepairs. The contractors must be licensed\
      \ and bonded if required by the local \njurisdiction. The Borrower must provide the contractors’\
      \ credentials and bids to the \nThe Mortgagee must review the contractors’ credentials, work experience\
      \ and client \nreferences and ensure that the contractors meet all jurisdictional licensing and\
      \ \nbonding requirements. The Mortgagee must examine the work plan and the \ncontractors’ bids and\
      \ determine if they fall within the usual and customary range for \nsimilar work. \nThe Mortgagee\
      \ may require the Borrower to provide additional Cost Estimates if \nException for Borrowers Doing\
      \ Own Work \nFor Borrowers performing their own work under a Rehabilitation Self-Help \nAgreement,\
      \ the Borrower must submit a work plan detailing the Work Items to be \nperformed by the Borrower\
      \ and a Cost Estimate from a contractor other than the \nBorrower that provides a breakdown of the\
      \ cost for labor and materials for each Work \nItem. The contractor must be licensed and bonded\
      \ if required by the local jurisdiction. \nThe Borrower must not be reimbursed for labor costs.\
      \ \n\n \n(D) Limited 203(k) Financeable Repair and Improvement Costs and Fees \nThe following costs\
      \ and fees may be financed: \n• costs of construction, repairs, and rehabilitation; \n• inspection\
      \ fees performed during the construction period, provided the fees \nare reasonable and customary\
      \ for the area; \n• the 203(k) Consultant fee, subject to the limits in the 203(k) Consultant Fee\
      \ \nSchedule section; \n• title update fees; and \n• permits. \nAny costs for Energy Efficient Mortgages\
      \ and Solar Energy Systems must not be \nincluded in financeable repair and improvement costs. \n\
      For Borrowers performing their own work, the Mortgagee must include the costs for \nlabor and materials\
      \ for each Work Item to be completed by the Borrower under a \nRehabilitation Self-Help Agreement.\
      \ \n(E) Limited 203(k) Financeable Contingency Reserves \nA Contingency Reserve is not mandated;\
      \ however, at the Mortgagee’s discretion, a \nContingency Reserve account may be established and\
      \ may be financed. The \nContingency Reserve account may not exceed 20 percent of the financeable\
      \ repair \nand improvement costs. \nThe Borrower may provide their own funds to establish the Contingency\
      \ Reserves. \nWhere the Borrower has provided their own funds for Contingency Reserves, they \n\
      must be noted under a separate category in the Repair Escrow Account. \n(F) Limited 203(k) Financeable\
      \ Mortgage Fees \nThe Mortgagee may include the following fees and charges in the rehabilitation\
      \ Cost \nEstimates. \n(1) Origination Fee \nThe Mortgagee may include a portion of the Borrower-paid\
      \ origination fee not to \nexceed the greater of $350, or 1.5 percent of the total of the financeable\
      \ repair and \nimprovement costs and fees and financeable Contingency Reserves. \nThe Mortgagee\
      \ may include a portion of the Borrower-paid Discount Points not to \nexceed an amount equal to\
      \ the discount point percentage multiplied by total of \nfinanceable repair and improvement costs\
      \ and fees and financeable Contingency \nReserves. \n\n \n(G) Limited 203(k) Ineligible Fees and\
      \ Costs \nThe following fees and costs may not be financed under the Limited 203(k): \n• Mortgage\
      \ Payment Reserves \n• architectural/engineering professional fees \n• a Feasibility Study \n(H)\
      \ Limited 203(k) Required Documentation \nThe following documentation is required for the Limited\
      \ 203(k). \n(1) Work Plan \nThe Mortgagee must obtain a work plan from the Borrower detailing the\
      \ proposed \nrepairs or improvements. The Borrower may develop the work plan themselves or \nengage\
      \ an outside party, including a Contractor or a 203(k) Consultant, to assist. \nThere is no required\
      \ format for the work plan. \n(2) Written Proposal and Cost Estimates \nThe Mortgagee must obtain\
      \ a written proposal and Cost Estimate from a \ncontractor for each specialized repair or improvement.\
      \ The Mortgagee must \nensure that the selected contractor meets all jurisdictional licensing and\
      \ bonding \nrequirements. The written proposal must indicate Work Items that require permits \n\
      and state that repairs are nonstructural. The Cost Estimate must state the nature \nand type of\
      \ repair and cost for each Work Item, broken down by labor and \nmaterials. \nThe Mortgagee must\
      \ obtain written Cost Estimates for each Work Item, broken \ndown by labor and materials, to be\
      \ performed by the Borrower under a self-help \n(3) Sales Contract \nThe Mortgagee must obtain a\
      \ copy of the sales contract and ensure that the sales \ncontract includes a provision that the\
      \ Borrower has applied for Section 203(k) \nfinancing, and that the contract is contingent upon\
      \ mortgage approval and the \nBorrower’s acceptance of additional required improvements as determined\
      \ by the \nWhen the Borrower is financing a HUD REO Property, the Mortgagee must \nensure that the\
      \ first block on Line 4 of form HUD-9548 is checked, as well as the \napplicable block for 203(k).\
      \ \n\n \nAppraisals for Standard 203(k) and Limited 203(k) \n(A) Establishing Value \nThe Mortgagee\
      \ must establish both an Adjusted As-Is Value and an After Improved \nValue of the Property. \n\
      (1) Appraisal Reports \nAn appraisal by an FHA Roster Appraiser is always required to establish\
      \ the After \nImproved Value of the Property. Except as described below in cases of Property \n\
      Flipping and refinance transactions, the Mortgagee is not required to obtain an asis appraisal and\
      \ may use alternate methods mentioned below to establish the \nAdjusted As-Is Value. If an as-is\
      \ appraisal is obtained, the Mortgagee must use it \nin establishing the Adjusted As-Is Value. \n\
      (2) Adjusted As-Is Value \nThe Mortgagee must establish the Adjusted As-Is Value as described below.\
      \ \n(a) Purchase Transactions \nFor purchase transactions, the Adjusted As-Is Value is the lesser\
      \ of: \n• the purchase price less any inducements to purchase; or \n• the As-Is Property Value.\
      \ \nThe As-Is Property Value refers to the as-is value as determined by an FHA \nRoster Appraiser,\
      \ when an as-is appraisal is obtained. \nIn the case of Property Flipping, the Mortgagee must obtain\
      \ an as-is appraisal \nif needed to comply with the Property Flipping guidelines. \n(b) Refinance\
      \ Transactions \n(i) Properties Acquired Greater Than or Equal to 12 Months Prior to \nthe Case\
      \ Assignment Date \nThe Mortgagee must obtain an as-is appraisal to determine the Adjusted \nAs-Is\
      \ Value when the existing debt on the Property plus the following \nitems exceeds the After Improved\
      \ Value: \n• Financeable Repairs and Improvement Costs; \n• Financeable Mortgage Fees; \n• Financeable\
      \ Contingency Reserves; and \n• Financeable Mortgage Payment Reserves (for Standard 203(k) \nonly).\
      \ \n\n \nWhen an appraisal is obtained, the Adjusted As-Is Value is the As-Is \nProperty Value.\
      \ \nThe Mortgagee has the option of using the existing debt plus fees \nassociated with the new\
      \ Mortgage or obtaining an as-is appraisal to \ndetermine the Adjusted As-Is Value when the existing\
      \ debt on the \nProperty plus the following items does not exceed the After Improved \nValue: \n\
      • Financeable Repairs and Improvement Costs; \n• Financeable Mortgage Fees; \n• Financeable Contingency\
      \ Reserves; and \n• Financeable Mortgage Payment Reserves (for Standard 203(k) \nonly). \nExisting\
      \ debt includes: \n• the unpaid principal balance of the first Mortgage as of the month \nprior\
      \ to mortgage Disbursement; \n• the unpaid principal balance of any purchase money junior \nMortgage\
      \ as of the month prior to mortgage Disbursement; \n• the unpaid principal balance of any junior\
      \ liens over 12 months old \nas of the date of mortgage Disbursement. If the balance or any \nportion\
      \ of an equity line of credit in excess of $1,000 was \nadvanced within the past 12 months and was\
      \ for purposes other \nthan repairs and rehabilitation of the Property, that portion above \nand\
      \ beyond $1,000 of the line of credit is not eligible for inclusion \nin the new Mortgage; \n• interest\
      \ due on the existing Mortgage(s); \n• Mortgage Insurance Premium (MIP) due on existing Mortgage;\
      \ \n• any prepayment penalties assessed; \n• escrow shortages. \n(ii) Properties Acquired Less Than\
      \ 12 Months Prior to the Case \nAssignment Date \nFor properties acquired by the Borrower within\
      \ 12 months of the case \nnumber assignment date, an as-is appraisal must be obtained. \nThe Adjusted\
      \ As-Is Value is the As-Is Property Value. \nFor properties acquired by the Borrower within 12 months\
      \ of the case \nassignment date by inheritance or through a Gift from a Family Member, \nthe Mortgagee\
      \ may utilize the calculation of Adjusted As-Is Value for \nproperties acquired greater than or\
      \ equal to 12 months prior to the case \n\n \n(3) After Improved Value \nTo establish the After\
      \ Improved Value, the Mortgagee must obtain an appraisal of \nthe Property subject to the repairs\
      \ and improvements. \n(B) Documents to be Provided to the Appraiser at Assignment \nThe Mortgagee\
      \ must provide the Appraiser with a copy of the Consultant’s Work \nWrite-Up and Cost Estimate for\
      \ a Standard 203(k), or the work plan, contractor’s \nproposal and Cost Estimates for a Limited\
      \ 203(k). \nix. Maximum Mortgage Amount for Purchase \nThe maximum mortgage amount that FHA will\
      \ insure on a 203(k) purchase is the lesser \n• the appropriate Loan-to-Value (LTV) ratio from the\
      \ Loan-to-Value Limits, \nmultiplied by the lesser of: \no the Adjusted As-Is Value, plus: \n▪ Financeable\
      \ Repair and Improvement Costs, for Standard 203(k) or \n▪ Financeable Mortgage Fees, for Standard\
      \ 203(k) or Limited 203(k); \n▪ Financeable Contingency Reserves, for Standard 203(k) or Limited\
      \ \n203(k); and \n▪ Financeable Mortgage Payment Reserves, for Standard 203(k) only; or \no 110\
      \ percent of the After Improved Value (100 percent for condominiums); or \n• the Nationwide Mortgage\
      \ Limits. \nFor a HUD REO 203(k) purchase utilizing the Good Neighbor Next Door (GNND) or \n$100\
      \ Down sales incentive, the Mortgagee must calculate the maximum mortgage \namount that FHA will\
      \ insure in accordance with HUD REO purchasing. \nx. Maximum Mortgage Amount for Refinance \nThe\
      \ maximum mortgage amount that FHA will insure on a 203(k) refinance is the lesser \n1. the existing\
      \ debt and fees associated with the new Mortgage, plus: \n• Financeable Repair and Improvement Costs,\
      \ for Standard 203(k) or Limited \n• Financeable Mortgage Fees, for Standard 203(k) or Limited 203(k);\
      \ \n• Financeable Contingency Reserves, for Standard 203(k) or Limited 203(k); \n• Financeable Mortgage\
      \ Payment Reserves, for Standard 203(k) only; or \n2. the appropriate LTV ratio below, multiplied\
      \ by the lesser of: \n• the Adjusted As-Is Value, plus: \no Financeable Repair and Improvement Costs,\
      \ for Standard 203(k) or \n\n \no Financeable Mortgage Fees, for Standard 203(k) or Limited 203(k);\
      \ \no Financeable Contingency Reserves, for Standard 203(k) or Limited \n203(k); and \no Financeable\
      \ Mortgage Payment Reserves, for Standard 203(k) only; or \n• 110 percent of the After Improved\
      \ Value (100 percent for condominiums); or \n3. the Nationwide Mortgage Limits. \n(A) Loan-to-Value\
      \ Ratios for Refinance \nThe table below describes the relationship between the Borrower’s Minimum\
      \ \nDecision Credit Score and the LTV ratio for which they are eligible. \nIf the Borrower’s Minimum\
      \ \nDecision Credit Score is: \nThen the Borrower is: \nat or above 580 \neligible for maximum financing\
      \ of 97.75%. \nbetween 500 and 579 \nlimited to a maximum LTV of 90%. \nFor Secondary Residences,\
      \ the maximum LTV is 85 percent. \nThe Mortgagee must obtain the mortgage payoff statement for existing\
      \ debt. \nxi. Maximum Mortgage Amounts for Energy Efficient Mortgages, Weatherization \nItems, and\
      \ Solar Energy Systems \nThe Mortgagee must calculate the maximum mortgage amount without factoring\
      \ in the \ncost of Energy Efficient Mortgage (EEM) items, Weatherization items, and solar energy\
      \ \nsystems. The Mortgagee may then add the cost of these improvements to determine the \nBase Loan\
      \ Amount. The Base Loan Amount may not exceed 110 percent of the After \nImproved Value of the Property\
      \ (100 percent for condominiums). \nFor Limited 203(k) transactions, the costs for energy improvements\
      \ can be in addition to \nthe $75,000 limit on total rehabilitation costs. \nxii. Combined Loan-to-Value\
      \ \n(A) Secondary Financing Provided by Governmental Entities, Homeownership \nand Opportunity for\
      \ People Everywhere Grantees, and HUD-Approved \nNonprofits \nThere is no maximum Combined Loan-to-Value\
      \ (CLTV) for secondary financing \nmeeting the requirements found in Governmental Entities, Homeownership\
      \ and \nOpportunity for People Everywhere (HOPE) Grantees, and HUD-Approved \nNonprofits. \n\n \n\
      (B) Secondary Financing Provided by Family Members \nThere is no maximum CLTV for secondary financing\
      \ meeting the requirements found \nin Family Members. \n(C) Secondary Financing Provided by Private\
      \ Individuals and Other \nOrganizations \nThe maximum CLTV for secondary financing provided by private\
      \ individuals and \nother organizations is 110 percent of the After Improved Value. Secondary financing\
      \ \nprovided by private individuals and other organizations may not be used to meet the \nBorrower’s\
      \ minimum downpayment requirement. \nThe Mortgagee must comply with the MIP requirements found in\
      \ the MIP Chart. \nFor the purpose of calculating the LTV for application of the MIP, the Mortgagee\
      \ must \ndivide the Base Loan Amount by the After Improved Value. \nThe Mortgagee must comply with\
      \ the underwriting requirements found in Origination \nthrough Post-closing/Endorsement and the\
      \ additional guidance provided below. \n(A) Required Documentation Standard 203(k) and Limited 203(k)\
      \ \n(1) Identity-of-Interest Certification \nIdentity of Interest refers to a transaction between\
      \ Family Members, business \npartners or other business affiliates. \nConflict of Interest refers\
      \ to any party to the transaction who has a direct or \nindirect personal, business, or financial\
      \ relationship sufficient to appear that may \ncause partiality and influence the transaction. \n\
      Sales transactions between Family Members and tenants/landlords that meet the \nrequirements for\
      \ the exception in Exceptions to the Maximum LTV are permitted. \nThe Mortgagee must ensure there\
      \ are no other instances of Identity of Interest or \nconflict of interest between parties in the\
      \ 203(k) transaction. The Borrower and \nthe 203(k) Consultant must each sign an Identity-of-Interest\
      \ certification that is \nplaced in the case binder. \nIf the Borrower selected a 203(k) Consultant\
      \ to perform a Feasibility Study, the \nMortgagee may select the same 203(k) Consultant for the\
      \ project without creating \nan Identity of Interest. \n\n \n(a) Borrower’s Certification \nThe\
      \ Borrower must sign a certification stating the following: \nI hereby certify to the Department\
      \ of Housing and Urban Development \n(HUD) and (Mortgagee), that I/We ___ do or ___do not have an\
      \ identityof-interest with the seller. I/We do not have an identity-of-interest with the \n203(k)\
      \ Consultant of the property. I also certify that I/We do not have a \nconflict-of-interest with\
      \ any other party to the transaction, including the \nreal estate agent, mortgagee, contractor,\
      \ 203(k) Consultant and/or the \nappraiser. In addition, I certify that I am not obtaining any source\
      \ of funds \nor acting as a buyer for another individual, partnership, company or \ninvestment club\
      \ and I/We ___will or ___will not occupy the residence \nI/We are purchasing or refinancing. \n\
      information provided above is true, accurate, and correct. WARNING: \nAnyone who knowingly submits\
      \ a false claim or makes a false statement is \nsubject to criminal and/or civil penalties, including\
      \ confinement for up to \n5 years, fines, and civil and administrative penalties. (18 U.S.C. §§\
      \ 287, \n1001, 1010, 1012, 1014; 31 U.S.C. §§ 3729, 3802). \nBorrower’s Signature \nCo-borrower’s\
      \ Signature \n(b) 203(k) Consultant’s Certification \nAll 203(k) Consultants are required to sign\
      \ the following certification after \npreparing/reviewing the Work Write-Up and Cost Estimate, stating:\
      \ \n“I hereby certify that I have carefully inspected this property for \ncompliance with the general\
      \ acceptability requirements (including health \nand safety) in HUD’s Minimum Property Requirements\
      \ or Minimum \nProperty Standards. I have required as necessary and reviewed the \narchitectural\
      \ exhibits, including any applicable engineering and termite \nreports, and the estimated rehabilitation\
      \ cost and they are acceptable for \nthe rehabilitation of this property. I have no personal interest,\
      \ present or \nprospective, in the property, applicant, or proceeds of the mortgage. I also \ncertify\
      \ that I have no identity-of-interest or conflict-of-interest with the \nborrower, seller, mortgagee,\
      \ real estate agent, appraiser, plan reviewer, \ncontractor, subcontractor or any party with a financial\
      \ interest in the \ntransaction. To the best of my knowledge, I have reported all items \nrequiring\
      \ correction and that the rehabilitation proposal now meets all \nHUD requirements for 203(k) Rehabilitation\
      \ Mortgage Insurance.” \n\n \ninformation provided above is true, accurate, and correct. WARNING:\
      \ \nAnyone who knowingly submits a false claim or makes a false statement is \nsubject to criminal\
      \ and/or civil penalties, including confinement for up to \n5 years, fines, and civil and administrative\
      \ penalties. (18 U.S.C. §§ 287, \n1001, 1010, 1012, 1014; 31 U.S.C. §§ 3729, 3802). \nConsultant’s\
      \ Signature \n(2) Borrower Acting as General Contractor or Doing Own Work (Self-Help) \nThe Mortgagee\
      \ must document approval for the Borrower to act as the general \ncontractor or to complete their\
      \ own work. \n• The Mortgagee must verify and document that the Borrower is either a \nlicensed\
      \ general contractor or can document experience in completing \nrehabilitation projects. \n• The\
      \ Mortgagee must ensure the Borrower demonstrates the necessary \nexpertise and experience to perform\
      \ the specific repair competently and in \na timely manner. \n• The Mortgagee must instruct the\
      \ Borrower of the requirement to maintain \ncomplete records showing the actual cost of rehabilitation,\
      \ including paid \nreceipts for materials and Lien Waivers from any subcontractors. \n• The Mortgagee\
      \ must ensure all permits are obtained prior to \ncommencement of work. \n• The Mortgagee must obtain\
      \ Cost Estimates that clearly state the cost for \ncompletion of each Work Item, including the cost\
      \ of labor and materials; \nhowever, only materials cost will be reimbursed. \n• The Mortgagee must\
      \ obtain a signed Rehabilitation Self-Help Agreement \nfrom the Borrower. \n(3) Repairs Noted by\
      \ the Appraiser \nWhen an appraisal report identifies the need for health and safety repairs that\
      \ \nwere not included in the Consultant’s Work Write-Up, Borrower’s work plan, or \ncontractor’s\
      \ proposal, the Mortgagee must ensure the repairs are included in the \nConsultant’s final Work\
      \ Write-Up or the Borrower’s final work plan. \n(4) Form HUD-92700-A, 203(k) Borrower’s Acknowledgement\
      \ \nThe Mortgagee must obtain an executed form HUD-92700-A, 203(k) Borrower’s \nAcknowledgement.\
      \ \n\n \n(5) Feasibility Study \nIf a Feasibility Study was performed to determine if the project\
      \ is financially \nfeasible, the Mortgagee must obtain a copy of the study. \n(6) Borrower Contractor\
      \ Agreement \nThe Mortgagee must obtain a written agreement between the Borrower and the \ngeneral\
      \ contractor, or if there is no general contractor, for each contractor. The \ncontractor must agree\
      \ in writing to complete the work for the amount of the Cost \nEstimate and within the allotted\
      \ time frame. \n(B) Required Documentation for Standard 203(k) Only \n(1) Consultant Final Work\
      \ Write-Up and Cost Estimate \nThe Mortgagee must obtain the final Work Write-Up and Cost Estimate\
      \ from the \nConsultant. The final Work Write-Up must include all required repairs and \nimprovements\
      \ to meet HUD’s Minimum Property Standards (MPS) and MPR (as \napplicable) and the Borrower’s electives.\
      \ \nThe Cost Estimate must state the nature and type of repair and cost for each Work \nItem, broken\
      \ down by labor and materials. Lump sum costs are permitted only in \nline items where a lump sum\
      \ estimate is reasonable and customary. \n(2) Architectural Exhibits \nThe Mortgagee must obtain\
      \ and review all required architectural exhibits included \nin the Consultant’s final Work Write-Up.\
      \ \n(3) Consultant/Borrower Agreement \nThe Mortgagee must obtain a written agreement between the\
      \ Consultant and the \nBorrower that fully explains the services to be performed and the fees to\
      \ be \ncharged for each service. The written agreement must disclose to the Borrower \nthat any\
      \ inspection performed by the Consultant is not a “Home Inspection,” as \ndetailed in the disclosure\
      \ form HUD-92564-CN, For Your Protection: Get a \nHome Inspection. \n(C) Required Documentation\
      \ for Limited 203(k) Only \nContractor’s Cost Estimate \nThe Mortgagee must obtain the final contractor’s\
      \ itemized estimate of the repairs and \nimprovements to be completed for all Work Items. \n\n \n\
      xv. Closing \nThe Mortgagee must comply with requirements found in the Closing section and the \n\
      additional guidance provided below. \nThere is only one closing that includes the rehabilitation\
      \ funds. The rehabilitation \nfunds are escrowed and disbursed as the work is satisfactorily completed.\
      \ \n(1) Establishing the Rehabilitation Escrow Account \n(a) Standard 203(k) \nThe Mortgagee must\
      \ establish an interest-bearing rehabilitation escrow \naccount to include, as applicable: \n• Standard\
      \ 203(k) Financeable Repair and Improvement Costs and Fees; \n• Standard 203(k) Financeable Contingency\
      \ Reserves; \n• Standard 203(k) Financeable Mortgage Payment Reserves; \n• the cost of EEM, weatherization\
      \ or solar energy systems \n• the Borrower’s own funds for Contingency Reserves. \n(b) Limited 203(k)\
      \ \nThe Mortgagee must establish an interest-bearing rehabilitation escrow \naccount to include,\
      \ as applicable: \n• Limited 203(k) Financeable Repair and Improvement Costs and Fees; \n• Limited\
      \ 203(k) Financeable Contingency Reserves; \n• the cost of EEM, weatherization or solar energy systems\
      \ \n• the Borrower’s own funds for Contingency Reserves. \n(c) Escrow Closeout Certification Screen\
      \ \nThe Mortgagee must complete all applicable fields on the Escrow Closeout \nCertification screen\
      \ in FHAC. \n(2) Initial Draw at Closing \nThe Mortgagee must document the amount and purpose of\
      \ an initial draw at \nclosing on the form HUD-92900-LT, FHA Loan Underwriting and Transmittal \n\
      Summary. \n\n \n(a) Standard 203(k) \nFor Standard 203(k) transactions, Mortgagees may disburse\
      \ the following at \nclosing: \n• permit fees (the permit must be obtained before work commences);\
      \ \n• prepaid architectural or engineering fees; \n• prepaid Consultant fees; \n• origination fees;\
      \ \n• Discount Points; \n• materials costs for items, prepaid by the Borrower in cash or by the\
      \ \ncontractor, where a contract is established with the supplier and an \norder is placed with\
      \ the manufacturer for delivery at a later date; and \n• up to 50 percent of materials costs for\
      \ items, not yet paid for by the \nBorrower or contractor, where a contract is established with\
      \ the \nsupplier and an order is placed with the manufacturer for delivery at a \nlater date. \n\
      For any Disbursements paid to the contractor, the Mortgagee must hold back \n10 percent of the draw\
      \ request in the Contingency Reserve. \n(b) Limited 203(k) \nFor Limited 203(k) transactions, Mortgagees\
      \ may disburse the following at \nclosing: \n• permit fees (the permit must be obtained before work\
      \ commences); \n• origination fees; \n• Discount Points; and \n• up to 50 percent of the estimated\
      \ materials and labor costs before \nbeginning construction only when the contractor is not willing\
      \ or able \nto defer receipt of payment until completion of the work, or the \npayment represents\
      \ the cost of materials incurred prior to construction. \nA statement from the contractor is sufficient\
      \ to document. \n(1) Rehabilitation Loan Agreement \nThe Mortgagee and Borrower must execute the\
      \ Rehabilitation Loan Agreement, \nwhich establishes the conditions under which the Mortgagee will\
      \ disburse the \nrehabilitation escrow account funds. \nThe Rehabilitation Loan Agreement is incorporated\
      \ by reference and made a part \nof the security instrument. \n\n \n(a) Standard 203(k) Rehabilitation\
      \ Period \nThe Mortgagee must review the 203(k) Consultant’s Work Write-Up to \ndetermine the time\
      \ frame for completion of repairs not to exceed 12 months. \n(b) Limited 203(k) Rehabilitation Period\
      \ \nThe Mortgagee must consult the Borrower Contractor Agreement to \ndetermine the time frame for\
      \ completion of repairs not to exceed nine months. \n(2) Security Instrument and Rehabilitation\
      \ Loan Rider \nIf the Mortgage involves releases from the rehabilitation escrow account, the \n\
      following language must be placed in the security instrument: \n“Provisions pertaining to releases\
      \ are contained in the Rehabilitation Loan Rider, \nwhich is attached to this mortgage and made\
      \ a part hereof.” \nThe Rehabilitation Loan Rider is a required modification to a security instrument.\
      \ \nData Delivery/203(k) Calculator \nThe 203(k) Calculator enables Mortgagees to calculate the\
      \ Maximum Mortgage amount, \nLTV for MIP, and the amount to establish a repair escrow when required\
      \ for all 203(k) \ntransactions. \nRequired data for the 203(k) Calculator are: \n• 203(k) Program\
      \ Type (Standard 203(k) or Limited 203(k)); \n• As-Is Property Value; \n• Adjusted As-Is Value;\
      \ \n• After Improved Value; \n• existing debt on the Property for a refinance; \n• credit for lead-based\
      \ paint stabilization per HUD REO contract (if applicable); \n• Financeable Repair and Improvement\
      \ Costs, for Standard 203(k) or Limited \n• Financeable Contingency Reserves, for Standard 203(k)\
      \ or Limited 203(k); \n• Financeable Mortgage Payment Reserves, for Standard 203(k) only; \n• Financeable\
      \ Mortgage Fees, for Standard 203(k) or Limited 203(k); \n• cost of EEM or solar energy systems\
      \ improvements; and \n• principal balance of secondary financing provided by private individuals\
      \ and \nother organizations. \nFor applications to be endorsed prior to the availability of data\
      \ delivery functionality in \nFHAC, the Mortgagee must detail the data delivery requirements shown\
      \ above on form \nHUD-92900-LT, or include the applicable 203(k) Maximum Mortgage Calculation \n\
      Worksheet. \n\n \nxvii. \nPost-closing and Endorsement \nThe Mortgagee must comply with requirements\
      \ in Post-closing and Endorsement. \n203(k) Mortgages are eligible for endorsement after the initial\
      \ mortgage proceeds are \ndisbursed and a rehabilitation escrow account is established. \n(A) Rehabilitation\
      \ Period \nThe rehabilitation period starts when the Mortgage is funded. \nThe rehabilitation period\
      \ is specified in the Rehabilitation Loan Agreement. \n(B) Extension Requests \nIf the work is not\
      \ completed within the rehabilitation period specified in the \nRehabilitation Loan Agreement, the\
      \ Borrower may request an extension of time and \nmust submit adequate documentation to justify\
      \ the extension. The Mortgagee may \ngrant an extension at its discretion only if the Mortgage Payments\
      \ are current or the \nBorrower is complying with the terms of the forbearance. \n(1) Required Documentation\
      \ \n• evidence that the Mortgage is current or the Borrower is complying with \nthe terms of the\
      \ forbearance; \n• an explanation for the delay from the Borrower, contractor, or Consultant; \n\
      • a new estimated completion date. \n(2) Escrow Closeout Certification Screen \nThe Mortgagee must\
      \ complete the required fields on the Escrow Closeout \nCertification screen in FHAC to document\
      \ the approval or the denial for the \nextension request of the rehabilitation period specified\
      \ in the Rehabilitation Loan \n(C) Failure to Start or Complete Work \nAs stated in the Rehabilitation\
      \ Loan Agreement, the Mortgagee may consider the \nMortgage to be in default if work: \n• has not\
      \ started within 30 Days of the Disbursement Date; \n• ceases for more than 30 consecutive Days;\
      \ or \n• has not been completed within the established time frame, or an extended time \nframe approved\
      \ by the Mortgagee. \n\n \nIf the Mortgagee considers the Mortgage to be in default for failure\
      \ to start or \ncomplete work, and the Mortgage is not in payment default, the Mortgagee must \n\
      apply any unused rehabilitation funds toward the principal amount. \nxviii. Rehabilitation Escrow\
      \ Account \nWhen the Mortgage closes, the Mortgagee must place all proceeds designated for the \n\
      rehabilitation, including the Contingency Reserve, inspection fees and any Mortgage \nPayments,\
      \ in an interest-bearing escrow account. \n• The Mortgagee must pay the net income earned by the\
      \ rehabilitation escrow \naccount to the Borrower through an agreed upon method of payment. \n•\
      \ The Mortgagee may allow net income to accumulate and be paid in one lump sum \nafter completion\
      \ of the rehabilitation. \n• The Mortgagee that is the custodian of the repair escrow funds is responsible\
      \ for \nensuring all funds from the escrow account are properly distributed. \n(A) Accounting of\
      \ 203(k) Rehabilitation Funds \nThe Mortgagee must utilize an accounting system that records all\
      \ transactions from \nthe rehabilitation escrow account and which documents the amount escrowed\
      \ for each \nof these categories: \n• repairs \n• Contingency Reserve \n• inspection fees \n• title\
      \ update fees \n• Mortgage Payments \n• other fees (i.e., architectural and engineering fees, Consultant\
      \ fees, permits, \nsupplemental origination fee and Discount Points on repair costs) \nThe accounting\
      \ system must provide: \n• the Borrower’s name and property address \n• the FHA case number \n•\
      \ the Closing Date \n• the scheduled completion date \n• the amount of funds in the rehabilitation\
      \ escrow account \n• the interest rate provided on the escrow account \nFor each draw on the escrow\
      \ account, the accounting system must record: \n• a list of Disbursements \n• the number of Days\
      \ in escrow \n• the amount of money in the account \n• the interest earned for the applicable time\
      \ period \n• the balance of interest remaining in the account \n\n \n(B) Project Management \nMortgagees\
      \ must ensure work is completed on schedule and workmanship is \nacceptable. \nWhen notified of\
      \ an issue, Mortgagees must intercede in disagreements among \nBorrowers, contractors, or Consultants.\
      \ \n(1) Health and Safety \nThe Mortgagee must ensure that all health and safety items not in the\
      \ original \nWork Write-Up or work plan that are discovered during the rehabilitation period \n\
      are addressed by completion of a change order. \n(2) Change Order Request \nThe Mortgagee must obtain\
      \ form HUD-92577, Request for Acceptance of \nChanges in Approved Drawings and Specifications, from\
      \ the Consultant or \ninspector if there are any deviations from the Work Write-Up. The Mortgagee\
      \ \nmust approve the change order before any work can be done. \n(C) Escrow Administration \nThe\
      \ Mortgagee is fully responsible for authorizing draw inspections, managing the \nrehabilitation\
      \ escrow account, and approving the associated draws from the account. \nIt is the Mortgagee’s responsibility\
      \ to ensure that any inspections are completed in a \nquality and timely manner, regardless of who\
      \ performs the inspections. \n(1) Release of Funds \nThe Mortgagee may release funds only when repairs\
      \ and improvements per the \ndraw request, whether made by the contractor or Borrower, meet all\
      \ federal, state, \nand local laws, codes and ordinances, including any required permits and \n\
      inspections. \nThe Mortgagee may release funds for lead-based paint stabilization only when a \n\
      state- or EPA-certified lead-based paint inspector, certified risk assessor or \nsampling technician,\
      \ independent of the firm that performed the stabilization, \nperforms the clearance examination\
      \ and clearance is obtained. \nFor an existing Structure moved to a new foundation or a Structure\
      \ that will be \nelevated, the Mortgagee must not release mortgage proceeds for the existing \n\
      Structure on the non-mortgaged Property until the new foundation has been \nproperly inspected and\
      \ the Structure has been properly placed and secured to the \nnew foundation. \n\n \nThe Mortgagee\
      \ must obtain Lien Waivers, or equivalent, at the time of any \nDisbursement of funds to ensure\
      \ the validity of the first lien on the Property. If all \nWork Items performed by a contractor\
      \ have not been completed at the time of \ndraw request, the Mortgagee must obtain a partial conditional\
      \ Lien Waiver for the \nWork Items that have been completed for each draw request. \nFor repairs\
      \ made by the Borrower under a self-help agreement, the Mortgagee is \npermitted to release funds\
      \ for materials only. \nWhen the rehabilitation escrow account includes Mortgage Payment Reserves,\
      \ the \nMortgagee must make monthly Mortgage Payments directly from the interestbearing reserve\
      \ account. Once the Property is able to be occupied, application of \nthe Mortgage Payment Reserves\
      \ will cease. Mortgage Payment Reserves \nremaining in the reserve account after occupancy of the\
      \ Property must be used to \nreduce the mortgage principal. \n(a) Draw Request \nThe Mortgagee must\
      \ obtain an executed form HUD-9746-A, Draw Request \nSection 203(k), from the 203(k) Consultant,\
      \ or from the Borrower when there \nis no 203(k) Consultant, requesting the release of escrow funds\
      \ for completed \nWork Items. \nThe Mortgagee must review and approve each draw request to ensure\
      \ that the \nwork for which funds are being requested has been completed satisfactorily \nand that\
      \ the form has been properly executed by the Borrower, contractor and \nConsultant, if any. \nThe\
      \ Mortgagee may not approve a draw request for work that is not yet \ncomplete. \nThe Mortgagee\
      \ may not approve draw requests for materials for work that is \nnot completed, except for: \n•\
      \ materials costs for items prepaid by the Borrower in cash or by the \ncontractor, where a contract\
      \ is established with the supplier and an \norder is placed with the manufacturer for delivery at\
      \ a later date; and \n• up to 50 percent of materials costs for items, not yet paid for by the \n\
      Borrower or contractor, where a contract is established with the \nsupplier and an order is placed\
      \ with the manufacturer for delivery at a \nlater date. \n(b) Change Orders \nWork must be 100 percent\
      \ complete on each change order item before the \nrelease of funds for the Work Items from the rehabilitation\
      \ escrow account. \n\n \n(c) Holdbacks \nThe Mortgagee must hold back 10 percent of each draw request\
      \ prior to \nrelease of funds from the rehabilitation escrow account. \nWhen a subcontractor is\
      \ 100 percent complete with a Work Item, the work \ncompleted is acceptable to the inspector, and\
      \ the contractor and subcontractor \nprovide the necessary Lien Waivers, or equivalent, the Mortgagee\
      \ is not \nrequired to hold back funds; the Mortgagee has discretion to hold back funds \nif not\
      \ required. \n(d) Timeliness of Release \nThe Mortgagee must release funds within five business\
      \ days after receipt of a \nproperly executed draw request and title update when necessary. \n(i)\
      \ Standard 203(k) Release of Funds \nMaximum Draw Requests \nThe Mortgagee may approve a maximum\
      \ of five draw requests (four \nintermediate and one final). \nContingency Reserve \nTo allow use\
      \ of contingency funds for improvements other than health and \nsafety when rehabilitation is incomplete,\
      \ the Mortgagee must determine \nthat it is unlikely that any health or safety deficiency will be\
      \ discovered, \nand that the Mortgage will not exceed 95 percent of the After Improved \nValue.\
      \ \nWhen the rehabilitation is complete, the Borrower may use the \nContingency Reserve account\
      \ to fund additional improvements not \nincluded in the original Work Write-Up. \nThe Mortgagee\
      \ must obtain a change order detailing the additional \nimprovements, including the costs of labor\
      \ and materials. \nThe Mortgagee must inform the Borrower in writing of the approval or \nrejection\
      \ of the request to use funds from the Contingency Reserve \naccount for additional improvements\
      \ within five business days. \nMethod of Payment \nThe Mortgagee will release escrow funds upon\
      \ completion of the \nrehabilitation in compliance with the Work Write-Up. \n\n \nThe Mortgagee\
      \ must issue checks to both the Borrower and contractors as \nco-payees, unless the Borrower provides\
      \ written authorization, at each \ndraw, to issue the check directly to the contractor. \nThe Mortgagee\
      \ may issue the check directly to the Borrower alone if the \nrelease is for: \n• materials for\
      \ work performed under a self-help agreement; or \n• materials for items prepaid by the Borrower\
      \ under contract with \nthe supplier. \n(ii) Limited 203(k) Release of Funds \nMaximum Number of\
      \ Draw Requests \nThe Mortgagee may approve a maximum of two draw requests per \ncontractor or the\
      \ Borrower (if acting as the contractor). \nWhen necessary, the Mortgagee may arrange a payment\
      \ schedule, not to \nexceed two releases, per specialized contractor (an initial release plus a\
      \ \nfinal release). \nTotal Repair Costs Less Than or Equal to $15,000 \nThe Mortgagee must ensure\
      \ that the repairs and/or improvements have \nbeen completed by obtaining contractor’s receipts\
      \ or a signed Borrower’s \nLetter of Completion. The Mortgagee is not required to perform or have\
      \ \nothers perform inspections of the completed work. \nThe Mortgagee may choose to obtain or perform\
      \ inspections if they \nbelieve such actions are necessary for program compliance or risk \nmitigation.\
      \ If the Mortgagee determines that an inspection by a third party \nis necessary to ensure proper\
      \ completion of the proposed repair or \nimprovement item, the Mortgagee may charge the Borrower\
      \ for the costs \nof no more than two inspections per contractor. \nTotal Repair Costs Exceeding\
      \ $15,000 \nThe Mortgagee must ensure that the repairs and/or improvements have \nbeen completed\
      \ by performing an inspection or by obtaining an inspection \nby a third party to determine that\
      \ the repairs have been satisfactorily \ncompleted. The Mortgagee must obtain a signed Borrower’s\
      \ Letter of \nCompletion. \n\n \nContingency Reserve \nThe Mortgagee must ensure funds escrowed\
      \ in the Contingency Reserve \nare used solely to pay for the proposed repairs or improvements and\
      \ any \nunforeseen items related to these repair items. \nMethod of Payment \nThe Mortgagee will\
      \ release rehabilitation escrow funds upon completion \nof the rehabilitation in compliance with\
      \ the work plan. \nThe Mortgagee may issue checks solely to the contractor, or issue checks \nto\
      \ the Borrower and the contractor as co-payees. \nThe Mortgagee may issue the check directly to\
      \ the Borrower alone if the \nrelease is for: \n• materials for work performed under a self-help\
      \ agreement; or \n• materials for items prepaid by the Borrower under contract with \nthe supplier.\
      \ \n(2) Final Escrow Closeout \nThe Mortgagee must include the interest earned in the final payment\
      \ on the \nrehabilitation escrow account and may include the total of all Holdbacks. \nHowever,\
      \ if it is required to protect the priority of the security instrument, the \nMortgagee may retain\
      \ the holdback for a period not to exceed 35 Days (or the \ntime period required by law to file\
      \ a lien, whichever is longer), to ensure \ncompliance with state Lien Waiver laws or other state\
      \ requirements. \n(i) Standard 203(k) \nBefore final release of rehabilitation escrow funds, the\
      \ Mortgagee must \napprove the final inspection and draw request signed by the Consultant, \ncontractor,\
      \ and Borrower. \n(ii) Limited 203(k) \nBefore a final release is made to any contractor, the Mortgagee\
      \ must \ndetermine that all work by the contractor has been completed, is \nacceptable by the Borrower,\
      \ and all necessary inspections have been made \nwith acceptable documentation. \n\n \n(b) Required\
      \ Documentation for Both Standard 203(k) and Limited \n• obtain the Borrower’s Letter of Completion\
      \ signed by the Borrower \nindicating satisfaction with the completed work and requesting a final\
      \ \ninspection and final release of funds; \n• obtain a CO, or equivalent, if required by the local\
      \ jurisdiction; \n• obtain all inspections required by the local jurisdiction; \n• complete the\
      \ Final Release Notice authorizing the final payment; \n• provide the Mortgagee’s extension approval\
      \ if applicable; and \n• obtain a release of any and all liens arising out of the contract or \n\
      submission of receipts, or other evidence of payment covering all \nsubcontractors or suppliers\
      \ who could file a legal claim. \n(3) Contingency Release \nThe Mortgagee must inform the Borrower\
      \ of its approval or rejection of the \nBorrower’s request for funds to be made available from the\
      \ Contingency Reserve \naccount for the purpose of improvements. \nA Borrower who established the\
      \ Contingency Funds with their own funds may \nreceive a refund of their funds, or may request the\
      \ remaining funds be applied \ntoward the principal balance. \nFor Standard 203(k), the Mortgagee\
      \ must either make funds available for \nadditional improvements or apply the funds toward the principal\
      \ balance if the \nContingency Reserve was financed. \nFor Limited 203(k), the Mortgagee must apply\
      \ the funds toward the principal \nbalance if the Contingency Reserve was financed. \n(4) Mortgage\
      \ Payment Reserve \nMortgage Payment Reserves remaining in the reserve account after the Final \n\
      Release Notice is issued must be used to reduce the mortgage principal. \n(5) Escrow Closeout Certification\
      \ \nAfter the rehabilitation escrow account is closed, the Mortgagee must \ncomplete the Escrow\
      \ Closeout Certification screen in FHAC within 30 Days \nafter the escrow account is closed. \n\n\
      \ \nThe Mortgagee must certify that the following documents were reviewed and \nverified for accuracy:\
      \ \n• Final Release Notice \n• Borrower’s Letter of Completion \n• title update/Lien Waivers \n\
      • draw request forms and inspection reports \n• change orders \n• Mortgagee accounting of the rehabilitation\
      \ escrow account and \npayment ledgers \n• contingency release letters \nQuality Control \nHUD will\
      \ hold Mortgagees and 203(k) Consultants fully accountable for the mortgage \nproceeds. \nMortgagees\
      \ must exercise due diligence with regard to the full scope of the 203(k) \nConsultant’s services.\
      \ Standards for the 203(k) Consultant’s performance must be clearly \ndefined in the Mortgagee’s\
      \ Quality Control Plan and should be provided to each \nConsultant that the Mortgagee relies on\
      \ in the 203(k) program. Mortgagees must evaluate \nand document the performance of these Consultants\
      \ on at least an annual basis, to include \na review of the Consultant's actual work product. \n\
      xx. Servicing \n(A) Delinquencies \nIf the Mortgage is Delinquent, the Mortgagee may refuse to make\
      \ further releases \nfrom the rehabilitation escrow account. Mortgagees must treat Mortgages in\
      \ \nforbearance, where the Borrower is complying with the terms of the forbearance, as \nnot delinquent\
      \ for the purpose of administering repair escrow. \n(B) Payment Default \nThe project must stop\
      \ if the Mortgage is in payment Default. The Mortgagee must \nobtain an inspection of all repairs\
      \ that have been completed up until this point by the \n203(k) Consultant for a Standard 203(k),\
      \ or for a Limited 203(k) by a third party. The \nMortgagee may approve a release of funds for Work\
      \ Items that have already been \ncompleted as of the date the work was stopped. \nThe inspection\
      \ obtained by the Mortgagee must also note any items that are required \nto be completed to protect\
      \ the interest of the collateral from deteriorating, such as a \nroof, and health and safety items\
      \ for a Property that is occupied. The Mortgagee must \nensure the completion of any Work Item that\
      \ the inspection determines is necessary \n\n \nto protect the occupants and/or the collateral.\
      \ The Mortgagee may use the services of \nthe mortgagor’s contractor, if appropriate, or may engage\
      \ the services of another \nqualified contractor to complete the Work Item. The Mortgagee may approve\
      \ a \nsubsequent release of funds for that Work Item. \nThe Mortgagee has the option to call the\
      \ Mortgage due and payable. \nIf the default is cured, the project may resume. \n(C) Bankruptcy\
      \ \nThe Mortgagee may not approve further advances if the Borrower declares \nbankruptcy unless\
      \ otherwise required by law or as needed to protect FHA’s first lien \nposition. The Mortgagee must\
      \ obtain an inspection of all repairs that have been \ncompleted by the 203(k) Consultant for a\
      \ Standard 203(k) or for a Limited 203(k) by \na third party. The Mortgagee may approve a release\
      \ of funds for Work Items that \nhave already been completed as of the date the work was stopped.\
      \ \n(D) Foreclosure of Mortgage during Rehabilitation Period \nIn the event of a foreclosure during\
      \ rehabilitation, the Mortgagee must obtain a final \ninspection to determine the amount of work\
      \ that has been completed since the start of \nconstruction and the cost for the work. \nUsing a\
      \ format similar to the Final Release Notice, the Mortgagee will authorize \nrelease of rehabilitation\
      \ escrow funds for the completed work and holdbacks on any \nprevious Disbursements. \nIf funds\
      \ remain in the rehabilitation escrow account, the Mortgagee will reduce the \namount of claim (unpaid\
      \ mortgage principal balance) by the unexpended funds in the \nrehabilitation escrow account. \n\
      The Mortgagee must submit a copy of the Final Release Notice with any insurance \nclaim."
    drafter_attestation: Verbatim section from snapshot 8c03836f77f317e1; boundary human-curated + substring-verified
      (2026-07-23).
  judgment: false
