Renovation Loans
FHA 203(k) Renovation Financing
Buy or refinance a property that needs work and finance eligible repairs and improvements in one FHA-insured mortgage.
How it works
Purchase or Refinance Plus Repairs in One Loan
An FHA 203(k) loan lets you finance both the property and the cost of eligible repairs and improvements in a single mortgage. The loan amount is based on the property’s expected value after the work is complete, so you can take on a property that needs updates without separate financing for the renovation.
Renovation funds are held in an escrow account and paid to your contractor as work is completed. Heather will help you understand the requirements before you make an offer or start planning your project.
Two options
Limited vs. Standard 203(k)
| Limited 203(k) | Standard 203(k) | |
|---|---|---|
| Best for | Smaller, non-structural updates | Larger projects, including structural work |
| Examples | Paint, flooring, kitchen and bath updates, appliances, windows, HVAC, roofing repairs | Additions, major remodels, structural repairs, foundation work, and more extensive projects |
| Repair amount | Up to HUD’s current Limited 203(k) maximum | Larger repair budgets (minimum repair amount applies) |
| 203(k) Consultant | Not required | Required: a HUD-approved consultant reviews the project and draw schedule |
| Complexity | Simpler and typically faster | More detailed process with inspections and draws |
HUD sets and periodically updates 203(k) limits. Heather will confirm current limits and requirements for your project.
The process
Step by Step
A 203(k) loan has a few more steps than a standard mortgage. Heather will guide you through each one.
- Initial conversation. Discuss the property, your renovation plans, and your budget with Heather.
- Pre-qualification. Heather reviews your finances and explains how much you may be able to borrow, including repairs.
- Contractor bids. Get detailed written bids from a qualified, licensed contractor. For a Standard 203(k), a HUD consultant prepares the scope of work.
- Appraisal. The property is appraised based on its expected value after improvements.
- Approval and closing. Your loan closes, and renovation funds are placed in escrow.
- Renovation. Your contractor completes the work, and funds are released as work is completed and inspected.
- Completion. After the final inspection, remaining funds are released and your project is complete.
FAQs
Renovation Loan Questions
What is an FHA 203(k) loan?
It is an FHA-insured mortgage that combines the purchase or refinance of a property with the cost of eligible repairs and improvements in a single loan.
What is the difference between Limited and Standard 203(k)?
Limited 203(k) is for smaller, non-structural repairs and does not require a HUD consultant. Standard 203(k) is for larger or structural projects and requires a HUD-approved 203(k) consultant.
Can I do the work myself?
Generally, work must be completed by qualified, licensed contractors. Heather can explain the specific requirements that apply to your project.
Can I use a 203(k) to refinance?
Yes. If you already own the property, a 203(k) refinance can combine your existing mortgage with the cost of eligible improvements.
Are luxury improvements eligible?
Some items, such as certain luxury features, are not eligible. Heather will help you understand what can be included before you finalize your plans.
How long do I have to complete the work?
Renovation timelines depend on the scope of work and program requirements. Heather will review the timeline with you before closing.
All loans subject to credit approval, FHA program eligibility, and property requirements. Programs, rates, and terms subject to change without notice. This is not a commitment to lend.
Have a Renovation in Mind?
Talk with Heather before you make an offer so you know exactly how a 203(k) can work for your project.