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FHA 203k Loan in Collier County, Florida

With just a 3.5 % down payment, Collier County homebuyers can acquire fixer-uppers thanks to the Federal Housing Administration's 203k loan program. This home purchase financing program is unique, unlike a regular FHA 203b loan.

Homebuyers can now buy a home without having to pay out of cash for renovations; instead, they can include the cost of upgrades and fixes in the mortgage itself and pay back over time as they make mortgage payments.

When looking for a home, especially in costly locations, you may have more options if you finance via the FHA 203k scheme. It also provides a convenient way to finance renovations and upgrades. The qualifying requirements for FHA 203k loans are typically less strict than those for other rehab loans because they are FHA-insured.

But before you start looking around for one, you should know how 203K loans work and what specific renovation package to choose. It's good to be familiar with both the "full" and the "streamlined" versions of this financing for house purchases and renovations.

How do FHA 203(k) FHA loans work?

Loan sizes and eligible projects vary between the whole and streamlined 203k loans. The nature and the total number of improvements you plan to make will determine your required version.

The total FHA 203k loan funds repairs and upgrades with a budget ranging from $5,000 to the county's maximum FHA loan cap. The simplified 203k, on the other hand, is only available for renovations under $35,000. The FHA always views additions like a pool or an outdoor kitchen as luxurious and typically disqualifies them.

Contingency funds are usually included in the loan to cover unforeseen repairs. If the bid's objectives have been met, the money may be used for a principal reduction or additional upgrades.

You can obtain money for the fixes and improvements you wish to make by refinancing into a 203k loan if you own a home. That way, you can rehabilitate your home into practical use and won't have to sell and move away.

Full FHA 203K

The FHA Full 203K is the financing to go for if your home needs structural repairs, has unsafe landscaping, or your restoration budget exceeds $35,000. It's also known as the FHA 203k standard loan. The budget for repairs must be above $5,000. However, the maximum amount you can borrow depends on the county's maximum FHA loan limit for your type of dwelling.

You must hire a contractor and a HUD consultant. The HUD Consultant will confirm that the work is completed per the signed contract and that the required minimum residential standards have been satisfied.

Eligible projects for the full 203K loan

  • Expanding the windows to allow more light to enter.
  • Finishing the attic or basement
  • Correcting structural issues
  • Erecting a retaining wall to stop floods
  • Repairing the pool
  • Constructing a garage if one is missing
  • Increasing the size of the kitchen by joining it with the dining room

Streamlined FHA 203k

When a home needs non-structural repairs, such as those recommended by a private inspector or an FHA-authorized appraiser, you can qualify for the FHA Streamline 203K, often known as the 203k Limited loan. The price of cosmetic touch-ups shouldn't exceed $35,000.

However, there is no set minimum. Homeowners can use this financing to preserve, enhance, or even spruce up their homes in preparation for sale. Another use for the loan is to get a recently purchased home ready for occupancy.

The streamlined 203K loan does not require the services of a HUD consultant. However, you'll need to create a thorough work plan to show that you understand the contractor's proposal. You cannot use this loan to make your mortgage payments.

What projects are eligible for the streamlined 203K loan?

  • Replacing windows to boost energy efficiency
  • Resurfacing of the floor
  • Replacing kitchen and bathroom countertops
  • Roof repainting
  • Replacing bathtubs and showers
  • Replacing gutters and downspouts
  • Repairing the septic
  • Installing new siding
  • Updating the power, plumbing, and HVAC system

Advantages of FHA 203k Loan

  • Immediately raises your home's equity.

  • You can make a down payment using gift cards.

  • Co-borrowers who are not tenants are permissible.

  • You can pair the 203k renovation plan with the $100 HUD deal.

  • The seller may still contribute up to 6% of the buydown and closing costs.

  • Financing is available for townhomes, condos, PUDs, single-family, double-plexes, tri-plexes, and quad-plexes.

  • You may request up to 110 percent of the property's estimated future value.

  • It can be used to make property purchases that would otherwise not be supported by conventional home loans.

  • Make your ideal home out of a fixer-upper acquisition.

  • It combines the price of buying a house and making modifications into one loan.

  • The down payment can be as little as 3.5%.

  • FICO score requirements have been reduced.

Disadvantages of FHA 203k loan

  • Mortgage insurance may be required.

  • Investment-related properties don't qualify for the financing program.

  • You may have to hire both a qualified contractor and a HUD consultant.

What are the eligibility requirements?

Even though it has a distinct goal, the 203k mortgage is essentially an FHA loan program. Compared to a traditional mortgage, it has more flexible eligibility requirements and follows FHA lending guidelines.

  • Credit score - To be eligible for an FHA 203k loan, you must have a credit score of at least 500. However, some lenders set the requirement higher.

  • Down payment - If you have a credit score of at least 580, the minimum down payment needed for this loan is 3.5%. However, for scores ranging from 500 to 579, the minimum down payment is 10%. State programs may offer down payment aid for people purchasing a house for the first time.

  • Maximum loan amount - The maximum loan amount for an FHA-insured mortgage in Collier County, Florida is $552,000 for single-family homes, $706,650 for duplexes, $854,200 for tri-plexes, and $1,061,550 for quad-plexes.

  • Foreclosure - Individuals who've experienced foreclosure in the past 3 years may not qualify for this financing.

What is the highest sum that can be borrowed for renovations?

Under the FHA's standard 203K loan, renovations have no upper budgetary restriction. However, the maximum loan amount is determined by a variety of factors. As already mentioned, these include the county's max FHA loan limits.

On the other hand, the renovation budget cannot exceed $35K if you apply for the streamlined 203K loan.

Do I have to start paying my mortgage immediately if I buy a fixer-upper but cannot live in it while it is being repaired?

If the HUD expert concludes that the home is unlivable without renovations, you can include up to six months' worth of mortgage payments into the loan and avoid having to pay two housing expenses at once.

How soon will the contractor receive payment for their work?

The contractor won't be paid in advance or when the loan closes. Instead, they'll be paid at the end of every project phase. But before they get paid, inspectors will check that the phase has been done according to the signed contract.

The full 203k loan enables up to five draws, whereas the 203k limited loan only authorizes one initial and one last draw per contractor.

What is the predetermined period for renovations?

All FHA 203k loans include a clause stating that work must begin within 30 days of loan approval and cannot be suspended for more than 30 consecutive days. The work must be completed within six months of the loan closing.

A hand holding money bag for home renovation

How do I apply for an FHA 203k loan in Collier County, Florida?

Here's a rundown of the steps involved in buying a house with an FHA 203k loan.

Step 1 - Consult with a qualified loan officer

You must select an FHA-affiliated lender and be prepared to provide your Social Security number, records of your debts and income, and creditworthiness. Consider your distinctive characteristics and needs while looking at loan options and lenders.

Particular FHA lenders better serve certain types of applicants. For instance, some lenders deal with first-time buyers while others focus on clients with lower FICO scores.

Select an appropriate lender, then arrange a meeting to discuss the various renovation loan plans that might work best for you. After that, they'll offer you some details to give to your contractor.

Step 2 - Request pre-approval

To help you decide what kind of house to look for, the loan officer will pre-qualify you for a loan and provide you with a range of sales prices and renovation sums.

Step 3 - Select a house and a renovation contractor

Interview possible contractors while hunting for a house, then select the ones you like.

Step 4 - Ask the contractor for a written estimate

Ask your contractor to review any features you'd like to add and those required for basic living standards.

Step 5 - Send the underwriter all the relevant information

You must deliver a copy of the purchase contract and the contractor's renovation quotes to your loan officer.

Step 6 - Hire a HUD Consultant

Work with a HUD expert if you want to apply for a full 203k loan. They will conduct an inspection and write up their findings in a report.

Step 7 - Appraisal, Review, and Underwriting

Following the receipt of the purchase agreement and contractor's bid, an appraisal will be performed and reviewed.

If there are any changes to the floor plan, specs and layouts must be made available for inspection. Finally, the loan paperwork will be delivered to the underwriters.

Step 8 - Close the loan

Once the loan underwriters approve the loan, the application is closed, and the seller receives compensation for their property. The remaining renovation funds are retained in escrow and paid out by the contract.

Step 9 - Move into your new home

After the financing closes, the improvements must start within 30 days and end within 6 months. If the renovations are not too significant, you might be able to live in the house during that time.

In what ways do 203k loans add value?

The decision to buy a house is a big one. Not only is this an investment, but you'll also live here. A 203K loan adds value in various ways.

You won't be responsible for paying for improvements made by the prior owner

Instead of purchasing a home that has already been remodeled and paying for costly and unpleasant upgrades done by the previous owner, it is preferable to purchase one that requires work and invest in the modifications that suit your taste and lifestyle.

You can quickly turn the fixer-upper into your dream house with a 203k loan and then move in.

No further financing will be required for repairs

With a 203k loan, you can buy or refinance a house that requires work while adding the amount of the renovation to the loan.

On the flip side, if you buy a recently renovated house and realize that certain things need to be fixed, you could be forced to get an additional line of credit, which means that you'll have to pay back another loan on top of your mortgage.

Boosts home equity immediately

Repairs and upgrades such as enlarging the kitchen, adding a bathroom, building a garage, and restoring the pool raise the value of a home. On the other hand, if you go for a recently remodeled high-end home, you might not be left with enough funds to make the modifications you want.

If the home has inadequate facilities, you might be compelled to use one bathroom with the whole family, park your car outside, etc.

Local Info About Collier County, Florida

Collier County, a thriving county with 321,520 residents, was founded in 1923 from a section of Lee County. The county was named for advertising legend and real estate entrepreneur Barron Collier, who funded the development of the Tamiami Trail, which connects Miami and Tampa and extends the route from Naples into the Everglades National Park. The overall population has increased by 28% every year since 2000.

The county has a beautiful setting with a variety of lovely beaches, commercial centers, parks, and golf courses. Additionally, it is home to the Ten Thousand Islands National Wildlife Refuge, Corkscrew Swamp Sanctuary, and Everglades National Park. The main driver of the county's economy is tourism. The Everglades National Park, one of the largest wilderness parks in the country, attracts a million people each year.

You can enjoy the above attractions with your family, then drop into the following shops for some ice cream and confectioneries.

Ben & Jerry's

You can order to go and then explore this adorable village's lovely shops. This scoop store is renowned for its euphoric flavors, smoothies, shakes, and sundaes.

It's in a lovely area. There is a sizable lake in the back where you can watch several enormous catfish swimming about in the lit-up water at night.

Sweet Annie's Ice Cream Parlor

This is a family-friendly ice cream and candy shop. A wide variety of tastes are available, and the portions are large. You can also select various gifts for your children and friends.

Angelic Desserts Bakery & Coffee

This store sells baked goods, coffee, tea, and sweets. You can get cinnamon buns and croissants for breakfast, cups and cookies for meetings or classes, and cakes and pies for dessert after supper. There are also vegan and gluten-free options.

Mitch's Cookies

The cookies are also fantastic. Mitch's Cookies, with its retro cookie sundaes and soda fountain, makes you feel like you've traveled back in time. It sells "homemade" Royal Scoop, a popular ice cream flavor in the Naples district.

Perfectly Scrumptious

This is an excellent boutique for cupcakes (giant, regular, and mini sizes), cake pops, chocolate-covered Oreos, marshmallows, pretzels, and more.

It's located in Bonita Springs and offers over 100 different flavors to choose from and the option to create your unique flavor options. Drop in for a beautiful experience.

Wrap-up - Does your house require some TLC?

In the US, numerous homes require remodeling. According to statistics, nearly a quarter of all homes in the United States are over 50 years old. FHA 203k loans can cover the majority of restoration projects, whether you're planning to buy a home or already own one. This will enable you to get your home back into functional repair or add some modifications you prefer.

However, renovations made possible by 203k loans are generally the responsibility of a licensed contractor and subject to FHA inspections and, occasionally, HUD consultant approval. Always work with a contractor with experience working on FHA 203k loan-financed renovations to ensure all program guidelines are met.

You can learn more about FHA 203k loans through your realtor or local lenders approved by the FHA.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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