What are FHA 203K Loans?

FHA 203k loan

Buying a house is expensive enough, but what happens when that house needs some major repair work? You apply for an FHA 203K loan.

FHA 203k loans let you borrow money for buying a home and performing extensive repair work using just a single loan. This helps people buy houses and make those houses acceptable for living as part of a thriving, healthy local economy. Compare this to an FHA loan, which only allows for buying a home, and not for any repair or renovation work that may be needed.

As the names indicate, both FHA and FHA 203K loans are insured by the Federal Housing Administration, meaning that approved lenders take on less risk when offering a mortgage. Less risk means a better chance for being approved, especially for homes that traditionally, lenders would not want to touch due to their less-than-great condition.

What Can You Finance in FHA 203K Loans?

Quite a bit actually!

  • The home itself: After all, you cannot repair something that you do not own.
  • The repairs: Think new roof, updated electrical system, or better insulation. Cosmetics are also allowed such as replacing appliances, new paint, carpet and etc. You need to use reputable contractors – no do-it-yourselfers please – and the repairs need to be completed within six months. The contractor cannot be related to you.
  • A place to live: Living in a construction zone is no fun, and maybe your new abode isn’t quite livable yet. So you need a place to stay while the work gets done. Your loan lets you borrow money for temporary housing up to six months.


Here are the basics of FHA 203K loans:

  • Streamlined FHA 203k loans are meant for homes that do not need structural repairs. These repairs can be up to $35,000. Traditional FHA 203k loans have a minimum requirement of $5,000 and can be used for structural repairs. Regardless of which type you have, repairs must be started within 30 days of closing.
  • You can finance up to 110 % of your home’s projected appraised value.
  • You need to provide a detailed plan for your home, including an estimate of the proposed costs. An appraiser will estimate the value of your home both in its current state and its future value based on the renovations.
  • Your interest rate may be a little higher than for a conventional mortgage, but remember that you are bundling two loans into one.
  • Your approval process may take a little longer as well, but once again, you need to be approved for both the house and the repairs.
  • Just like the FHA loan, you can offer a down payment as low as 3.5% of the cost of the home and repairs combined.
  • You need to pay mortgage insurance for the entire length of the loan.
preapproval cta

Shamrock Financial Can Help!

When you dream, dream big, and Shamrock can help you make those dreams a reality. As an approved FHA lender, Shamrock knows very well the process for FHA 203K loans. Give us a call and get started today!

Free FHA Fact Sheet