203K World

A 203K Renovation Loan is an amazing tool in this market. It is the only loan that allows you to buy a house in less-than-perfect condition and finance renovations with a single loan... with only 3.5% in down payment. Not to mention, it allows a homebuyer to spend up to 110% of the renovated house's appraised value – which is a nifty little tool in this market as well...

BUT... can the borrower be his/her own contractor?

 Lots of new clients suffer from the misconception that a 203K loan requires $5,000 for minimum "qualified" repairs... (Hmmm, typical government title that really could be said much simpler). The govy likes to turn everything into an acronym… so lets call these minimum qualified repairs "MQR."

So what is this MQR thing?

The FHA USED TO mandate $5,000 MQR for 203K loans. Under those rules, the house must have needed repairs to bring it up to FHA Minimum Property Standards. All those REQUIRED repairs needed to cost $5,000 at a MINIMUM. You could then add your elective repairs on to this to come to a TOTAL PROJECT COST (within typical 203k limits, of course).

Brendan "Brent" Kluge
(National Mortgage Licensing System No. 330566)

16 Years Experience in Residential Mortgage Lending

HUD Licensed 203(k) Consultant

Contract HUD 203(k) Speaker/Instructor

HUD DE Underwriter

Licensed MHIC, Md. Home Improvement Contractor

Homebuilder since 1999

Licensed Maryland Auctioneer

Army – CW2 (Helicopter pilot / Special Forces)

203(k) Detailed Experience

With broad experience in the Baltimore-area real estate market as a homebuilder, contractor, realtor, mortgage lender, and underwriter, I have been helping clients through the renovation loan process for more than 16 years. I specialize in federal Department of Housing and Urban Development (HUD) 203K loans and have written more than 3,900 of these mortgages since 1995. In addition to working with individual borrowers, I have taught numerous classes and seminars on the 203K process for lenders, nonprofits, homebuyer groups, and HUD, as a contract speaker. I'm a certified HUD direct endorsement (DE) underwriter and licensed 203K consultant.

As a Maryland Home Improvement Commission licensed contractor, I offer a practical understanding of the renovation process and can help you navigate all facets of financing and renovating your new home. I have firsthand experience with the financial nuances of writing 203K loans and the technical requirements placed on the contractors you will hire to do the work. Working with me and my team, you'll avoid all the common pitfalls less experienced lenders encounter when trying to write these specialized mortgages.

I urge my clients to check the references of any loan officer and company you consider hiring. Always request their NMLS license numbers and confirm they don't have a history of complaints... When you choose Brent Kluge & Company, you can be CONFIDENT you've placed your home project is in the hands a team with the experience and leadership to ensure a smooth 203K loan and renovation process.

What's a 'Renovation Loan'?

With a standard Federal Housing Administration (FHA), Veterans Administration, or conventional loan, lenders can only approve mortgages up to the house's appraised value and for homes meet the guidelines for "minimum property standards." If a property needs thousands (or tens of thousands) of dollars in renovation work to transform into your dream home, federal rules prohibit you from wrapping that work into your standard loan. You need to have cash… or you can apply for a "renovation loan."

An FHA 203K renovation loan is one that allows you to incorporate the costs of renovating a property into the mortgage. These loans give you the flexibility to finance a property that will not pass an appraisal inspection or is in otherwise less-than-perfect condition. This loan gives you money to buy the home and fix it up, all in one loan, with one settlement. Here are just a few advantages to this versatile program:

• Down payment is only 3.5% and fees are nominal.
• Use this loan to PURCHASE a new home or as a tool to REFINANCE and RENOVATE your existing home!
• Vast array of eligible improvements, including building an addition, finishing the basement, mold remediation, structural repairs, new bathrooms and kitchens, or just minor renovations like fresh paint and carpet.
• Eligible properties include standard residential properties, townhouses, row houses, multiunit residences (up to four units), mixed-use, and even condos.

The 203K program includes parameters that protect your interests throughout the process and limit the uneasiness individuals feel when launching a renovation/rehab project. This program is so flexible, you can finance almost any property using an FHA 203K, as long as the borrower lives in at least one unit on the property as his primary residence.

If you're looking at a property and questioning how you'll afford the renovation work to make it worth your investment…. Give us a call at 410.591.8300 to discuss your project with one of our experienced 203K coaches. The service is free and only takes a few minutes. We would be delighted to assist you.

Do You Need a 'Streamline' of 'Full' FHA 203K

The Department of Housing and Urban Development (HUD) allows two types of 203K: "Streamline" and "Full."

Most individual homebuyers qualify (and prefer) the Streamline 203K. Most buyers find the Streamline process quicker, easier, and cheaper to use. This loan is PERFECT for "light" renovations, where the construction costs total roughly $30,000.00. (Federal rules set the limit at $35,000, but you budget needs to included loan costs and a contingency reserve.)

Other factors that make the Streamline option attractive include:

• You receive 50% of your construction funds upfront at the settlement table. The remainder is paid after project completion.
• You can hire up to three "specialist contractors" for the project (i.e. heating/air condition technicians, flooring installers, painters). This allows you to act as your own general contractor – SAVING YOU MONEY.
• You are not required to hire a 203K Consultant (though it's still a good idea in some cases – talk to your 203K coach about whether you need one).
• You can finance a large assortment of eligible improvements.
• Individual repair jobs do not have to meet a $5,000 in minimum requirement.
• You can purchase or refinance most any residential property: single-family home, townhouse, condo, HUD REO, foreclosure, as-is.

Keep in mind, you cannot use the Streamline 203K loans for structural work.

HUD's "Mortgagee Letter" details the FHA 203(k) Streamline program. We urge all prospective clients read the letter to fully understand the program. Click here to see HUD’s 203K Streamline program description.



The FHA 203k loan is the single best finance tool available in today's market which allows you the flexibliity to finance a property that will not pass an appraisal inspection or is in otherwise, less than perfect condition.  This loan gives you money to buy the home and fix it up, all in one loan, with one settlement.  Here are just a few advantages to this versitile program:

• Down payment is only 3.5% and fees are nominal.
• Use this loan to PURCHASE a new home or as a REFINANCE tool and renovate your existing home!
• Eligible improvements include putting on an addition, finishing the basement, mold remediation, structural repairs, new bathrooms and kitchens, or just minor renovations like fresh paint and carpet.
• Eligible properties are vast, to include standard residential properties,  1-4 units, mixed-use, and even condos.
• The program has parameters in place to protect your interests throughout the process and limit the intimidation or uneasiness associated with a renovation/rehab project.

This program is so flexible, almost ALL properties can utilize an FHA 203k for financing, as long as the property has at least one unit that is occupied as the primary residence of the borrower.  Instead of diagnosing if this loan is a fit for you, just give us a call and discuss your project with one of our experienced 203k Coaches.  The service is free and only takes a few minutes.  We would be delighted to assist you.