What Is an FHA 203(k) Loan?
The FHA 203(k) is a government-backed renovation loan that lets you purchase a home and finance the cost of repairs or improvements in a single mortgage. Instead of buying a home with one loan and then taking out a second loan for renovations, the 203(k) wraps everything into one. You put 3.5% down on the total cost (purchase price plus renovation).
There are two types: the Standard 203(k) for major renovations over $35,000 (structural work, additions, full gut rehabs) and the Limited 203(k) for minor improvements under $35,000 (cosmetic updates, appliances, flooring). Standard 203(k) requires a HUD consultant.
Why 203(k) matters: In competitive markets, fixer-uppers are often the only affordable option. The 203(k) lets you compete for properties other buyers overlook because they cannot get conventional financing on homes that need work.
Who FHA 203(k) Is For
- Buyers purchasing homes that need renovation
- Homeowners who want to refinance and renovate in one transaction
- Buyers in competitive markets looking at properties others skip
- Anyone who wants one loan instead of a purchase loan plus a construction loan
Key Features
Minimum 580 credit score for 3.5% down. Standard 203(k) covers structural repairs, room additions, and full gut renovations with no maximum repair limit (up to FHA loan limits). Limited 203(k) covers up to $35,000 in non-structural improvements. Contractors must be licensed. Work must be completed within 6 months. FHA mortgage insurance applies.