FHA 203K Loans

About FHA 203K Home Loans

An FHA 203K loan is a loan backed by the federal government and given to buyers who want to renovate a home. An FHA 203K loan allows the borrower to finance the home, plus provides financing to do the necessary renovations to the home.

The main benefit of these loans is that they give you the ability to buy a home in need of repairs that you might not otherwise have been able to afford to buy. Plus, the down payment requirements are minimal, and often you may be able to receive a favorable interest rate.
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Loan requirements

There are many requirements to qualify for an FHA renovation loan, including:

Occupation – The main restriction on an FHA 203(k) loan is that the borrower has to be the owner-occupant of the home. Investors are not eligible for this kind of loan, although, in certain situations, nonprofit organizations might be allowed to obtain one.

Credit score and down payment – You’ll need a minimum credit score of 580 with 3.5 percent down, or a minimum score of 500 with a 10 percent down payment.

Debt-to-income (DTI) ratio – Your debt-to-income (DTI) ratio, which measures your gross monthly income against your monthly debt payments, can’t exceed 43 percent.

Renovation rules – You can only use a limited 203(k) loan for non-structural renovations costing up to $75,000. For a standard 203(k) loan, the work has to involve major construction and cost at least $5,000.

Timeline – For the standard 203(k) loan, the work has to be completed within 12 months of closing. For a limited 203(k) loan, the work has to be completed within nine months of closing.

Types of FHA 203(k) loans

Limited 203(k) loan

  • Loan limit up to $75,000

  • No minimum project cost

  • Eligible projects: minor remodeling and non-structural repairs, such as redesigning a kitchen, painting rooms or purchasing new flooring


Standard 203(k) loan

  • Loan limit subject to your area’s FHA loan limits, which vary by county

  • Minimum project cost: $5,000

  • Eligible projects: major renovations and structural additions, such as replacing a roof or adding on a sunroom


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