FHA 203(k) Renovation Mortgage

The above FHA 203k Home Renovation Mortgage Scenario hypothetical example is based upon a $100,000 purchase of an abandoned home with a $250,000 renovation budget and an approximate $45,000 reserve fund

Buy, Renovate, and Finance it all in one loan.

The FHA 203(k) renovation mortgage allows homebuyers and homeowners to purchase or refinance a property and finance renovations with a single mortgage. Instead of taking out separate loans for the purchase and repairs, the FHA 203(k) combines everything into one streamlined solution.

Backed by the Federal Housing Administration, this program is designed to help buyers transform homes that may not qualify for traditional financing due to condition issues.

What Is an FHA 203(k) Loan?

An FHA 203(k) loan is a government-insured mortgage that allows you to:

Buy a home that needs repairs or updates
Finance renovation costs into the loan
Base the loan amount on the after-improved value of the property

This program is ideal for buyers who find a home they love but need to fix outdated features, safety issues, or cosmetic problems.

Two Types of FHA 203(k) Loans

1. Limited (Streamline) 203(k)

Best for smaller, non-structural repairs.

Key features:

Renovation budget up to $75,000
No structural changes allowed
No consultant required (in most cases)

Eligible improvements include:

Flooring, paint, drywall
Kitchen or bathroom updates (no layout changes)
Roof repair (not structural rebuild)
HVAC replacement
Appliances
Minor electrical or plumbing repairs

2. Standard (Full) 203(k)

Designed for major renovations and structural repairs.

Key features:

No set maximum renovation limit (based on loan limits)
Structural changes allowed
Usually Requires a HUD-approved 203(k) consultant
Draw schedule during construction
Renovation funds can include up to six months of temporary housing while work is completed

Eligible improvements include:

Structural repairs
Room additions
Foundation work
Converting a single-family home from multi-unit
Accessibility upgrades
Kitchen and bathroom updates (non-structural)
Roof replacement
HVAC, plumbing, and electrical upgrades
Flooring replacement
Interior and exterior paint
Appliance installation
Window and door replacement
Decks, patios, and porches
Basement finishing (non-structural)
Energy efficiency and weatherization upgrades

Minimum Requirements to Qualify

Credit Score

580+ for 3.5% down (most lenders)
Lower scores may require higher down payment

Down Payment

3.5% minimum based on the total loan amount (purchase + renovations)

Employment & Income

Stable employment history (typically 2 years)
Verifiable income
Must meet FHA debt-to-income (DTI) guidelines

Occupancy

Primary residence only
Not for investment or second homes

How Much Can You Borrow?

The FHA 203(k) loan amount is based on the lesser of:

Purchase price + renovation costs, or
Appraised value after improvements

All loans must stay within county FHA loan limits, which vary by location.

What Can the 203(k) Be Used For?

✔️ Outdated or damaged homes
✔️ Cosmetic upgrades that prevent traditional financing
✔️ Properties with safety or livability issues
✔️ Fixer-uppers listed below market value
✔️ Homes that won’t qualify for FHA, USDA, or Conventional “as-is”

Automatic Disqualifiers for FHA 203(k)

You may not qualify if:

The property is not owner-occupied
The home will be used as an investment or rental
Renovations include luxury items (pools, outdoor kitchens, tennis courts)
The property cannot be completed within required timelines
Borrower income or credit cannot be documented
Renovation plans exceed FHA guidelines

Benefits of an FHA 203(k) Loan

One loan, one payment
Finance repairs without high-interest credit cards or personal loans
Increase home value immediately
Compete with cash buyers on fixer-uppers
Turn “unlivable” homes into long-term residences

Is an FHA 203(k) Right for You?

If you’re struggling to find a move-in-ready home, the FHA 203(k) could open doors to properties other buyers overlook—while allowing you to build equity through renovation.

📩 Want to see if a 203(k) works for your situation?

Reach out for a personalized scenario and renovation strategy.

Call or Text 970-829-2437