What improvements are NOT eligible under the Limited 203(k)?

The Limited 203(k) Rehabilitation Mortgage Insurance Program mortgage proceeds may not be used to finance major rehabilitation or major remodeling. FHA considers a repair to be “major” when any of the following are applicable:

• the repair or improvements are expected to require more than six months to complete;
• the rehabilitation activities require more than two payments per specialized contractor;
• the required repairs arising from the appraisal:
rtgage proceeds may not be used to finance major rehabilitation or major remodeling. FHA considers a repair to be “major” when any of the following are applicable:

- necessitate a Consultant to develop a specification of repairs/Work Write-Up; or
- require plans or architectural exhibits; or

• the repair prevents the borrower from occupying the property for more than 15 days during the rehabilitation period.

Additionally, the Limited 203(k) mortgage proceeds may not be used to finance the following specific repairs:
• converting a one-family structure to a two-, three- or four-family structure;
• constructing a windstorm shelter;
• decreasing an existing multi-unit structure to a one- to four-family structure;
• landscaping and site improvements;
• reconstructing a structure that has been or will be demolished;
• repairing, reconstructing or elevating an existing foundation;
• purchasing an existing structure on another site and moving it onto a new foundation;
• making structural alterations such as the repair of structural damage and new construction, including room additions;
• making additions or alterations to support commercial use or to equip or refurbish space for commercial use; and/or
• making recreational or luxury improvements, such as:

- new swimming pools;
- an exterior hot tub, spa, whirlpool bath, or sauna;
- bath houses;
- barbecue pits, outdoor fireplaces or hearths;
- tennis courts;
- satellite dishes;
- tree surgery (except when eliminating an endangerment to existing improvements);
- photo murals; or
- gazebos.

REFERENCE: https://www.hud.gov/FHAFAQ