FHA 203k Loan Information


So it seems there’s just one little hang-up about your dream home. It needs work. It needs a LOT of work.

But there’s good news. You may qualify for an FHA 203k loan.

With this type of loan, you can finance the purchase of your home and the cost of repairs into a single mortgage. This eliminates the prohibitive amount of time, money, and hassle involved in getting two separate loans. A traditional home improvement loan often has high interest and a balloon payment. Sometimes banks won’t even finance repairs until after the home is purchased, leaving both buyers and sellers in a tough catch-22. Section 203k offers a simpler option to allow the purchase and rehabilitation of a property.


Be aware that 203k does have some limitations, such as county-based FHA loan limits. There are also different types of 203k loans.  A Streamlined 203k loan (which requires a much simpler process than a Standard 203k) stipulates that the cost of repairs will not exceed $35,000.

There are also stipulations regarding the contractors that you hire to do the work. Your lender will review the contractor’s credentials and experience. Before granting approval, they will also look at the contract and any estimates. No more than a 50% advance payment is allowed, and there is no allowance made for do-it-yourself projects.

Single-family homes are eligible for 203k, as well as 1-4 unit buildings. Buildings must be primarily residential to qualify, though in certain circumstances a mixed-use residential and commercial property may eligible.


Hand with a hammer to drive a nail, roof repairs

There are some very specific guidelines about the types of repair that 203k can cover. These include repairs or updates to the home’s HVAC systems, flooring, weather stripping and insulation, and many other simple but necessary repairs. Some repairs that are not covered under 203k include major remodeling and repairing of structural damage. HUD also requires that homes under this program adhere to certain guidelines in terms of energy efficiency. Make sure you are aware at the outset of exactly what repairs are covered under this loan to make an informed decision.


After thoroughly reviewing 203k guidelines with an experienced mortgage broker, you will have a better idea of whether a 203k loan is right for you. Although simpler than a traditional loan for this purpose, there is still a lengthy process involved in securing a 203k loan. You will need to find an FHA approved lender who has experience in this specific type of loan.


The information here is just a partial outline of FHA 203k. For more information about how to qualify for and obtain this type of loan , visit the HUD Website.