Function

• The 203(k) allows borrowers to include the cost of repairs in their mortgage, allowing them to carry a single loan to cover both purchase and repair costs of the home. This simplifies the process for purchasing a home in need of repair. The FHA offers a number of 203(k) programs with varying conditions and monetary limits.
  
  

Rehabilitation

• The Rehabilitation, or Section 203(k), allows borrowers to finance repairs ranging from minor renovation to reconstruction. According to the FHA, borrowers under this program may use the funds for work as extensive as demolishing a house, as long as the foundation remains in place. Other allowable repairs include adding or replacing flooring and plumbing, improving disabled accessibility and major landscape work. The minimum cost of repairs to qualify is $5,000 as of 2010.
  
  

Streamline

• The Streamline 203(k) is a limited repair program intended for less extensive renovations which would not necessarily require plans, architects and/or engineers. Borrowers are able to complete their own work and cost estimates. The Streamline 203(k) has a limit of $35,000, but when the cost exceeds $15,000 the borrower must complete or arrange an inspection to ensure all listed repairs were completed. There is no minimum cost to be eligible for the program. This program may also be used to refinance a home.
  
  

Borrowers

• Investors are prohibited from using the programs. First time buyers are defined by the FHA as individuals who have not owned a home in the three years preceding the date of application for the program. Non-profit organizations and local government agencies are also eligible for the programs.
  
  

Properties

• Buildings of up to four units are eligible. Mixed-use properties are also eligible providing the percentage of commercial space falls under FHA guidelines. The allowable amount of floor space used for commercial purposes is 25 percent for a one-story building, 49 percent for a two-story and 33 percent of a three-story building. Condominiums are also eligible with limitations. Condo renovation is limited to interior work only; the exterior is the responsibility of the condominium association. Only 25 percent of the units may be undergoing renovation simultaneously. Additionally, the individual buildings in the condominium must consist of a maximum of four units to be eligible.