Eligible Properties and Improvements

As long as you pay more than $5,000 in rehab expenses, you can use a 203(k) mortgage to acquire and improve nearly any one- to four-family property. In fact, using 203(k) money, you can convert a single-family home into a two-, three-, or four-unit property; or you can convert a multifamily property into, say, a duplex or single-family home. As long as you create value, you can adapt the property as you like.

For the repairs and renovations, the 203(k) mortgage permits an endless list of possibilities. Stay away from luxuries such as saunas and hot tubs— although you can spend to repair these items if they're already installed— and you can do about anything you want. Here are some examples:

  • Install skylights, fireplaces, energy-efficient items such as ther-mopane windows and heavier insulation, or new appliances such as a stove, refrigerator, washer, dryer, trash compactor, and dishwasher.
  • Finish off an attic or basement.
  • Eliminate pollution or safety hazards such as lead paint, asbestos, and underground storage tanks.
  • Add living units such as an accessory apartment or mother-in-law suite.
  • Recondition or replace plumbing, roof, or HVAC systems.
  • Improve aesthetic appeal with paint, carpet, tile, and exterior siding.
  • Install or replace a well or septic system.
  • Landscape and fence the yard.

"This program doesn't restrict the niceties," says Michael Noel of Pinnacle Financial. "If you want to install upgraded kitchen cabinets, you can do that. If you want to add crown moldings, you can do that. You can't borrow the money to install a swimming pool, but you can use the money—up to $1,500—to fix up a swimming pool."

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