An FHA Standard 203(k) Renovation loan lets you buy or refinance a fixer-upper home and finance repairs in one convenient monthly payment.

Highlights of the FHA Standard 203(k) mortgage:

• Minimum down payment of 3.5%
• May be used for eligible 1- to 4- unit homes, townhouses, and FHA-eligible condominium units; condominium improvements are generally limited to unit interior
• Flexible credit guidelines when compared to conventional renovation loans
• Combine home purchase/refinance and renovation costs into one loan
• Finance up to 110% of the property’s after-improved value, subject to FHA maximum mortgage calculations and loan limits; eligible condominiums capped at 100% of after-improved value
• Minimum renovation cost of $5,000

What is an FHA 203(k) Renovation Loan?

An FHA 203(k) renovation loan allows you to buy or refinance a home and include the cost of repairs or upgrades in a single mortgage without the need of a second loan. The maximum mortgage is determined using FHA 203(k) calculations that consider the property’s after-improved value, program rules, and applicable FHA mortgage limits. This makes the program ideal for fixer-uppers or homes that need significant improvements.

As of November 4, 2024, the Standard 203(k) program includes:

• Expanded Renovation Time – 12 months
• Double the number of Financeable Payments – up to 12 months of payments allowed to be financed into the mortgage to cover non-occupancy costs during renovation

How Does an FHA 203(k) Loan Work?

Step 1: Find a home that needs repairs or updates
Step 2: Work with contractors to plan renovations
Step 3: The home is appraised based on its future value
Step 4: Your loan is approved and closed
Step 5: Renovation funds are held in escrow
Step 6: Funds are released in stages as work is completed

FHA Standard 203(k) uses FHA loan qualification standards but also includes additional renovation program requirements such as FHA approved 203(k) consultant involvement, work write-ups, escrowed repair funds, and staged draw disbursements. For more information, contact a Loan Originator.

Eligible improvements are, but not limited to, all eligible improvements from the FHA Streamline 203(k), and:

• Structural alterations
• Converting a single-family home into a 2-, 3-, or 4-unit home
• Decreasing an existing multi-unit structure to a 1- to 4-family structure
• Water connections
• Improving accessibility features

Luxury upgrades are not eligible with an FHA 203(k) mortgage, such as gazebos, outdoor fireplaces, or building a swimming pool.

The Standard 203(k) program is ideal for:

• Buyers purchasing a fixer-upper
• Homeowners refinancing and upgrading their property
• Projects exceeding $5,000 in repairs
• Borrowers looking for a low down payment renovation loan

You can learn more about FHA 203(k) renovation loans on our blog.