203k Rehabilitation Mortgages

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Chapter 1
Appraisal & Property Requirements
Page 1-10

General

The Section 203(k) program is the Department’s primary program for the rehabilitation and repair of single family properties. The program allows the borrower to get just one mortgage loan, at a long-term fixed or adjustable rate, to finance or refinance both the acquisition and the rehabilitation. See HUD Handbook 4240.4 rev-2 and 4150.2 Appendix B-1. Cooperatives are not eligible for 203(k).

Appraisals

	The appraiser is not to include VC conditions on the appraisal report for a 203(k). However, if the appraiser identifies repair conditions that were not noted in the work write-up, the appraiser should notify the lender.
	An appraiser may not perform a dual role on the same 203(k) property. To prevent apparent conflict of interest an appraiser may not be a 203(k)consultant, or have a direct or indirect involvement on any property they appraise.
	The appraisal will contain a statement on the report by the final value that the appraisal being performed is a 203(k) as improved per plans & specifications. A copy of the plans, specifications, work write-up and other conditions upon which the value was based must be part of the appraisal package.
	In mixed use properties, commercial space is to be appraised as if it were residential. The lot value assigned should be for the residential use, not the commercial use.

Consultants

Additional information on matters relating to consultants may be obtained from HUD mortgagee letter 95-40 and 00-25. Please note that HUD mortgagee letters and Handbooks may be researched on the Internet at http://www.hudclips.org/sub_nonhud/cgi/hudclips.cgi.