top of page
Featured Posts

FHA 203k Renovation Loans Explained

One dilemma that many home buyers find themselves in is finding the perfect neighborhood within the perfect school system, close to work, close to family & friends etc etc., but the house is in dire need of repair. Other times, buyers actually set out to find a home that they can House Hack or put some sweat equity into.

Well with the FHA 203k renovation loans, this is possible. These loan products allow you to barrow the money to purchase the property, and to fix it up. Renovation Loans are one loan in two parts. These loans allow you to purchase the home “in its present condition” and then do the needed repairs. All the money for the needed repairs are included in the loan. The first part of the loan pays the seller, while the second part of the loan is put in an escrow account to be used as you do the renovation / rehab work.

How do I qualify?

  • You must have at least a 600 credit score to qualify (this may change).

  • You must have 3.5% of the purchase price as a down payment.

  • Aside from your down payment, you must have at least 3 months in mortgage payments (reserves) at the time of the purchase. (These reserves could be held in your retirement accounts such as 401k, IRA, 457 etc)

  • You must be willing to live in the property for 1 year. (Only one of the borrowers must live in the property, so if you're an investor, you may be able to partner with someone that will live in the property).

  • You cannot have a current FHA loan on any other property (There are exceptions for extenuating circumstances).

  • There are no income restrictions on this loan product. So don't worry if you've been turned down for other programs because your income was too high to qualify.

  • On the other hand, if your income isn't quite where you'd like it to be, FHA will allow you to calculate in up to 75% of the property's rental income to help you qualify.

How much are closing costs?

Closing costs are typically 4%-5%. You could ask the seller to pay closing costs up to 6%.

How do I start the process?

Well, the first thing you'll have to do is get pre-approved for a loan, Contact me here so I can connect you with a mortgage lender that's familiar with 203k loans (not all mortgage lenders do 203k loans). After approval, you'd go shopping and find a property that you'd like to purchase. The whole process generally takes about 30-45 days after you select the property.

What types of properties will qualify?

1-4 Unit Properties, FHA Approved Condos and some mixed use properties will qualify. Mixed use properties are ok as long as the residential portion is at least 51% of the building (calculated by square footage).

What types of renovations are allowed?

You can get pretty extensive with the renovations. Everything from addressing peeling paint, to a total rebuild. Here are some common projects:

  • Structural Alterations and Reconstruction

  • Remodel Kitchen and Baths

  • Repair / Replacement of Roofs, Gutters and Downspouts

  • Repair / Replace Exterior Decks, Patios, Porches

  • Replace Windows, Doors, and Siding

  • Eliminate Health and Safety Issues (Mold, Lead Paint)

  • Repair/Replace Plumbing, Install Well, and/or Septic System

  • Energy Conservation Improvement

  • Improvements to Accessibility for a Disabled Person

  • Add Garage or Sun Room

  • Replace Missing or Stolen Pipes

What is the maximum amount that I could borrow?

Well, of course that depends on how much you qualify for based on your debt and income, but aside from that, it depends on the area that you're purchasing the property. See the FHA loan limits here. But FHA will allow you to borrow up to 110% of the property's "after repair value" (ARV).

What if the property is uninhabitable when I purchase it

You can purchase the property and defer the move in for up to 6 months while you renovate it. During this time, you can also defer your monthly mortgage payments by rolling them into the loan.

Can I do the work myself?

Yes & No... Any/all contractors that will be performing work on the house must be licensed & insured. If you are a licensed & insured contractor, and you've been so for at least 3 years, you can ask FHA for a "Self-Help Agreement". Just understand that it's very common that they deny these agreements.


I must mention that there are two versions of the FHA 203k loan. There is the 203k "Streamline" (sometimes referred to as "Limited"), and the 203k "Standard" loan. There are some major differences between the two. All of the information provided above applies to either both versions, or the Standard version. After you've selected a property to purchase, your lender will help you decide which version is best for you.

If you have any questions concerning 203k Renovation Loans, feel free to contact me here.


bottom of page