FHA 203(k) renovation loan benefits & guidelines 

Backed by the Federal Housing Administration (FHA), an FHA 203(k) loan lets you combine the cost of buying or refinancing a home with money for repairs or renovations. By ensuring repairs are completed to address safety hazards, the FHA 203(k) loan gives lenders confidence to approve financing for homes that need a little extra work.

 

 

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Why choose an FHA 203(k) renovation loan?

You can use an FHA 203(k) loan to buy a fixer-upper or refinance your current home, and in either case, you’re able to bundle costs for renovation and your mortgage into a loan with a single monthly payment.

To qualify for an FHA mortgage, you will need:

  • Credit score of at least 580
  • Property that is your primary residence
  • Loan amount within FHA 203(k) loan limits

With a lower credit score threshold and down payment options starting at 3.5%, an FHA 203(k) is an attractive choice for first-time homebuyers or those with limited savings.

The FHA 203(k) program offers two options, each with different guidelines.


  • Streamline or limited 203(k) loan


For smaller projects, the Limited 203(k) Loan allows homeowners to finance up to $75,000 in repairs with no minimum cost required. 


  • Standard 203(k) loan


With a minimum repair cost of $5,000 required, the Standard 203(k) Loan is designed for projects exceeding $75,000.

FHA 203k loan type

How to apply for an FHA 203(k) renovation loan

Applying for an FHA 203(k) renovation loan is simple with Rate’s Digital Mortgage. Follow these steps.

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1. Review your finances

Check your credit score, income, DTI ratio and cash on hand for a down payment. 

 

 

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2. Plan your renovations

Develop a detailed renovation plan, including cost estimates. Larger projects may require a HUD-approved consultant to oversee plans.

 

 

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3. Gather key documents

You’ll need to provide income verification, tax returns, asset statements and personal identification.   

 

 

 

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4. Apply online

Once you submit your application, your Loan Officer will help you from there.  

 

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5. Close and start renovations

After closing, renovations must begin within 30 days and finish within nine months for a limited loan or 12 months for a standard loan.  

 

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Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply. 


*Savings, if any, vary based on the consumer’s credit profile, interest rate availability and other factors. Contact Rate for current rates. Restrictions apply. 
 


 

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All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate, Inc. Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action. 
 
Sources: 
https://www.hud.gov/program_offices/housing/sfh/203k/203k--df