203k Loans
FHA 203(k) Loans
An FHA 203(k) loan is a government-backed mortgage that lets you buy or refinance a home and roll renovation costs into the same loan. It is often used for fixer-uppers or to update an existing home.
Types of 203(k) Loans
- Standard 203(k): Designed for major renovations with a minimum of $5,000 in repair costs. There is no cap on renovation expenses, but the total must stay within FHA loan limits. Requires a HUD-approved consultant and can cover structural changes, room additions, and even landscaping.
- Limited (Streamline) 203(k): For smaller, non-structural repairs up to $35,000. A consultant is not required. Covers cosmetic updates such as painting, flooring, and appliance replacements.
How to Get Started
Eligibility Requirements
- Minimum credit score of 580, though some lenders may require 620 or higher.
- Down payment of 3.5% of the combined home price and renovation costs.
- Debt-to-income ratio typically capped at 43%.
- The property must be your primary residence.
- Borrowers must be U.S. citizens or lawful permanent residents.
- Total loan amount must stay within FHA limits for your area.
Eligible Renovations
- Standard loan: Structural repairs, accessibility improvements, water or sewer connections, and unit conversions.
- Limited loan: Cosmetic projects such as kitchen or bath remodels, HVAC upgrades, roofing, painting, and energy-efficient improvements.
- Not allowed: Luxury upgrades like pools, hot tubs, or non-permanent fixtures.
Refinancing Options
You can also use an FHA 203(k) loan to refinance an existing mortgage while financing renovations. The process includes an appraisal of both the current home value and the projected post-renovation value.