An FHA 203(k) loan lets you buy a home, or refinance the one you own, and finance the renovation in the same mortgage. The loan amount is based on the value of the home after the work is done.
Two versions
- Limited 203(k) for non-structural repairs and updates such as kitchens, baths, flooring, roofing and systems, up to the current HUD limit for the Limited program.
- Standard 203(k) for larger or structural projects, including additions and foundation work. A HUD-approved 203(k) consultant oversees the plan and the draws.
Key terms
- FHA down payment rules apply: 3.5% of the combined purchase price and renovation cost with a qualifying score.
- You can borrow up to FHA's percentage of the projected after-improved value, within the county loan limit.
- Primary residences only; the home must be owner-occupied.
- FHA mortgage insurance applies, as on any FHA loan.
- Work must be done by licensed contractors and completed within the time the lender sets, usually six months.
Who it suits
Buyers who find a well-located home that needs work, and homeowners who want to renovate without a separate construction loan. If you already have significant equity, a HELOC or cash-out refinance may be simpler; we will compare them.