Play your cards right, remodelers, and your next big niche might be clients who can’t pay you a cent until the government approves work that you had to finance on your own nickel. ... Bet you can’t wait.

With the 203(k), borrowers take out one loan to cover the purchase or refinance and remodeling costs. The Streamlined (k) loan is for up to $35,000 in repair work. The Standard (k) loan is for more extensive structural work.
FHA. FY 09 data as of Aug. 15, 2009 With the 203(k), borrowers take out one loan to cover the purchase or refinance and remodeling costs. The Streamlined (k) loan is for up to $35,000 in repair work. The Standard (k) loan is for more extensive structural work.

New Spaces Home Remodeling, in fact, is pumped. “I think we’re all being thrust into having to rethink how we approach financing,” says Peter Schommer, who handles sales for the Minneapolis design/build firm. As a former real estate and mortgage professional, he knows that banks need to sell foreclosed properties, and tighter lending restrictions and lower appraisals make it more difficult for home buyers and owners alike to pay for remodeling.

Schommer sees a silver lining in renovation loans, in particular the Federal Housing Administration’s 203(k) loan program, which rolls remodeling costs into mortgages and refinances. Long associated with inner-city blight-prevention, the 30-year-old 203(k) can be used on higher-end homes now, thanks in part to the Recovery Act, which raises FHA loan limits to as much as $729,750 for single-family homes.

Catches include finding participating lenders and educating the public and realtors about the 203(k) program. Minnesota mortgage adviser Jennifer Adams, a key part of New Spaces’ 203(k) strategy, is one such source of information.

—Leah Thayer, senior editor, REMODELING. Click here to read more about 203(k) loans.