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Overview of the FHA 203k Fixer-Upper Loan

The 203k loan program is administered by the Federal Housing Administration (FHA) for the rehabilitation and repair of one-to-four unit dwellings. Borrowers can use the FHA 203k program to finance the purchase and renovations of a home with a single loan. This single-loan feature is unique, because otherwise the buyer would have to obtain 3 loans- a loan to purchase the property, then after settlement, a second loan to finance the repairs, and after completion of repairs, a third loan to payoff the construction loan. The FHA 203k loan program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. Borrowers can also use an FHA 203k loan to renovate or remodel their current residence.

There are two main types of FHA 203K loans: Standard, and Streamline. The Standard 203k is used for homes that need major rehabilitation. There must be at least $5,000 worth of repairs and loan limits are based on property type and location. The Streamline 203k is used for homes that need minor repairs. It has no minimum repair cost, but has a cap of $35,000.

FHA 203k Basics

  • The FHA 203k loan allows you to up finance 110% of your home's "after repair value"
  • You can qualify with as little as 3.5% down
  • The FHA 203k loan can be used for owner occupied 1-4 unit dwellings that have been completed for at least a year
  • The FHA 203k loan can be used to purchase or refinance a home that does not need repairs to finance the cost of modernization

FHA 203k Benefits

  • Create instant equity in your new home
  • Purchase homes that would not otherwise qualify for financing
  • Turn a fixer upper into your dream home
  • Only one loan needed to purchase and renovate


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