The FHA Limited 203(k) renovation loan (often called the streamline 203k) allows borrowers to finance non-structural repairs and improvements into a single mortgage when purchasing or refinancing a home.

The Limited 203(k) includes a renovation account of up to approximately $75,000, which must cover:

  • The cost of repairs (labor and materials)
    • Required contingency reserve (minimum 10%, sometimes higher depending on project)
    • Financeable fees and program costs

Structural repairs are not permitted under the Limited 203(k).
Structural work requires the Full / Standard 203(k) program.

Limited 203(k) Math for Purchase Loans

Here is the math for 203(k) loans:

Sales Price + Rehab Account = Acquisition Cost

Rehab Account = repair costs + 10–15% contingency + financeable fees

The down payment (3.5%) is based on the Acquisition Cost.

The Acquisition Cost may exceed the appraised value by up to 10%.

Maximum FHA loan limits exist on a county-by-county basis per FHA’s website link.

Click here to see current FHA loan limits in New Hampshire.

If the transaction is a purchase, at closing the seller is paid and the home transfers to the buyer. Rehab funds are then available to complete the project.

Limited 203(k) Program Requirements — Step by Step

  1. Purchase Transactions

    A 203(k) Addendum must be executed and signed by both borrower and seller as part of the purchase and sale agreement. Your lender will provide this form.

  2. Borrower Work Plan

    The borrower must prepare a written Work Plan (Statement of Intent) that itemizes all repairs and improvements to be completed. Simply outline what you hope to accomplish and we will help guide the process.

  3. Contractor Rules

  • You must use one general contractor or up to three contractors
    • Subcontractors hired by a contractor do not count toward the three-contractor limit
    • Some lenders require one contractor only (all subcontractors must fall under that contractor’s bid)
    • FHA guidelines allow some lender discretion, so requirements may vary slightly by lender
  • Contractor Proposal Requirements — each contractor must submit a detailed written proposal including:

• Borrower name and property address
• Contractor contact information (name, address, phone)
• Line-item breakdown of labor and materials
• Signed by both contractor and borrower
• Identification of any required licensed subcontractors (electrician, plumber, etc.)

  • Contractor Approval and References

Contractor must:

  • Complete contractor profile sheet (each lender may use their own form)
    • Provide references (references will be verified)
    • Provide required contractor program documentation

Subcontractors do not need full paperwork but must provide proof of insurance.

4. Insurance Requirements

  • Contractor must provide $500,000 minimum liability insurance
    • Insurance certificate must name borrower and property as additionally insured
    • All subcontractors must also provide proof of liability insurance ($500,000 minimum)
    • Some lenders may require higher coverage limits

5. Lender Review

After contractor documentation is submitted:

  • Lender reviews proposals and required paperwork
    • Revisions are common and often required
    • Final approved proposal establishes the renovation budget

5. Appraisal Process

After proposals are finalized:

  • Appraisal is ordered to provide both an “as-is” and an “as-completed” value
    • Appraiser may require additional repairs or corrections
    • Contractor must revise proposal if additional requirements are added

(This step is very common.)

6. Permit Requirements

  • Local municipality must verify required permits for the project
    • Permits may be required before funds can be disbursed
    • Most lenders require a permit certification form completed by the contractor

7. Initial Disbursement at Closing (if requested)

  • Typical maximum initial draw: up to 35% of total project
    • Some lenders allow up to 50% of material costs
    • Some lenders require permits before releasing initial funds

8. Draws After Closing

For additional draws:

  • Required permits must be in place
    • Disbursement request must be signed by contractor
    • Work must be verified before funds are released

Important Program Notes

  • Proposal revisions are common during both lender review and appraisal review
    • Not all lenders structure Limited 203(k) loans exactly the same due to FHA guideline flexibility
    • NH Housing also offers an FHA 203(k) renovation program with slight variations
    • For structural repairs and/or higher budgets, see the Full / Standard FHA 203(k) program

Guidance Throughout the Process

Renee Duval guides borrowers through every step of the Limited 203(k) process — from structuring the renovation plan through contractor approval, appraisal, and final disbursement — to help ensure the loan is completed smoothly and successfully.

Pre-Approve for This Type of Loan

Thinking about using an FHA Limited 203(k)? Start with a pre-approval so we can review your project, financing, and next steps together.

Apply here:  www.applywithRenee.com

 
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