Renovations under a 203k mortgage may be minor to major. Any FHA loan qualified property can qualify. When the property is appraised, two values are provided: an as-is value, and an after-improved value, taking into account the planned repairs. Your final loan amount is based on the after-improved value.
A 203k FHA loan is different because it will include repairs & renovation costs.
After the purchase of the home closes escrow, work on the planned repairs and renovations begins. As work completes the contractors are paid in draws and phases. In the case of a 203k Streamline (renovations less than $35,000), there are two draws. In the 203k Standard, there are up to 5 draws and a HUD Consultant works with the contractor, lender and homeowner.
During the lending process, your contractor will have provided the lender a list of the planned repairs and renovations, together with his quote for the work to be performed. Use a contractor who is experienced in 203k loans and can be trusted to stand behind his quotes and complete the work to your satisfaction.