FHA 203k Loans
Government-backed renovation financing — purchase and rehab a property with one FHA-insured mortgage.
Program Overview
The FHA 203k loan is a government-backed mortgage that combines the purchase price of a home and the cost of renovations into a single FHA-insured loan. There are two versions: the Standard 203k for major renovations (structural work, room additions, etc.) and the Limited 203k (formerly "Streamline") for cosmetic and minor improvements up to $35,000. Both allow low down payments and flexible credit guidelines.
Who Is This Loan For?
- ✓ Buyers purchasing properties that need renovation
- ✓ First-time homebuyers buying below-market fixer-uppers
- ✓ Borrowers who want government-backed renovation financing
- ✓ Homeowners refinancing and renovating simultaneously
Key Benefits
Low Down Payment
Just 3.5% down on the total project cost (purchase price + renovation).
Flexible Credit
FHA guidelines — credit scores as low as 580 with 3.5% down.
Two Options
Standard 203k for major work, Limited 203k for up to $35K in improvements.
Based on Future Value
Your loan amount is based on the after-improved appraised value.
Qualification at a Glance
General Requirements
- Credit score 580+ for 3.5% down
- DTI up to 43–50%
- Must use FHA-approved appraiser
- HUD consultant required for Standard 203k
- Licensed contractor required
- Property must be 1–4 units, primary residence
Advantages
- ✓ Low 3.5% down payment
- ✓ Flexible credit requirements
- ✓ Finance major and minor renovations
- ✓ Turn a fixer-upper into your dream home
- ✓ Available for refinance too
Tradeoffs to Consider
- ↔ HUD consultant required for Standard 203k
- ↔ MIP required for the life of the loan
- ↔ Primary residence only
- ↔ Contractor must be licensed and approved
- ↔ Draw inspection process required
- ↔ Timeline restrictions on completion
Common Scenarios
First-Timer Buying a Fixer
A first-time buyer with a 620 credit score purchases a $200K home needing $50K in renovations. FHA 203k finances the full $250K with 3.5% down ($8,750).
Limited 203k Cosmetic Update
A buyer purchases a structurally sound home that needs $30K in kitchen and bathroom updates. The Limited 203k wraps the cosmetic work into the mortgage — no second loan needed.
Documents Typically Needed
- Standard FHA documentation
- Contractor bids and work plans
- HUD consultant report (Standard only)
- Appraisal with as-is and after-improved values
- Contractor license and insurance verification
Frequently Asked Questions
Standard 203k allows structural renovations with no dollar cap (subject to FHA limits). Limited 203k covers non-structural improvements up to $35,000. Standard requires a HUD consultant; Limited does not.
Broker Disclosure: Scout Financial Group Inc DBA Airus Lending is a licensed mortgage broker (NMLS #2187418) and does not make loans or credit decisions. Airus Lending works with multiple wholesale lenders to help borrowers compare available loan options. Final approval depends on the lender, automated underwriting findings, documentation, state requirements, and overall borrower profile. Not all applicants will qualify.