FHA 203(k) LOANS
Buy or Refinance a Fixer-Upper With an FHA 203(k) Loan
An FHA 203(k) loan lets eligible borrowers finance the home and approved repairs into one FHA mortgage — so you can buy, renovate, and build equity with one simple loan.
Your information is secure and never shared.
FHA 203(k) Loan Snapshot
Finance purchase + repairs
Primary residence focused
Limited and Standard options
Repair funds held in escrow
Low down payment FHA option
Buy a fixer-upper
Purchase homes that need work and make them your own.
Finance repairs into the loan
Roll renovation costs into your FHA mortgage.
Low down payment FHA option
Take advantage of FHA’s low down payment structure.
Great for primary residences
Designed for homeowners who plan to live in the property.
FHA RENOVATION LOAN GUIDE
What Is an FHA 203(k) Loan?
An FHA 203(k) loan is a government-backed mortgage that allows eligible borrowers to finance both the purchase or refinance of a home and the cost of approved repairs or renovations — all in one loan. It is part of the renovation loans family of programs.
Unlike a standard FHA loan, the renovation budget is included in the mortgage amount. Funds for the repairs are typically held in escrow and released as the work is completed.
One Loan for the Home and the Repairs
Buy or refinance with confidence knowing your renovations are financed and managed through your mortgage.
How FHA 203(k) Loans Work
A renovation loan combines the home and the repairs into one mortgage. Here is the typical FHA 203(k) path from pre-approval to completed work.
1. Get pre-approved
Determine how much you may be able to borrow with an FHA 203(k) loan.
2. Find a property
Find a home that needs repairs and meets FHA requirements.
3. Contractor bid / scope of work
Get detailed bids and a scope of work from a licensed contractor.
4. Appraisal based on after-improved value
The home is appraised based on its future value after repairs.
5. Loan closes
Close on your loan. Funds for repairs are set aside in escrow.
6. Repair funds held in escrow
Funds are held by your lender and released in stages.
7. Work completed and funds released
Work is inspected and funds are released as completed.
Let our renovation loan experts guide you through each step.
Limited 203(k) vs. Standard 203(k)
FHA offers two renovation paths. The right one depends on the size and type of work your project needs.
Limited 203(k)
Smaller projects and cosmetic updates
Non-structural repairs only
Simpler process and faster close
Up to $75,000 in financed repairs, including certain allowed costs
Standard 203(k)
Larger renovations and major updates
Structural work may be allowed
More complex projects
HUD consultant is required
What Repairs Can You Finance?
FHA 203(k) loans can cover a wide range of approved repairs and improvements, including:
Kitchen & bathroom updates
Flooring
Roofing
HVAC
Plumbing & electrical
Energy-efficient improvements
Paint, appliances & accessibility
Health & safety repairs
Eligible repairs depend on FHA, lender, property, contractor, and project guidelines. Andes Mortgage can help you review the scope before you move forward.
Who Is a Good Fit for an FHA 203(k) Loan?
FHA 203(k) financing works well for a range of buyers and homeowners. You may be a good fit if you are:
First-time buyers buying a fixer-upper
Great way to enter the market and build equity.
Buyers using FHA financing on a home needing repairs
Finance the home and improvements together.
Homeowners refinancing and improving their current home
Use renovation financing to improve your home’s future.
Buyers who want to improve livability and value
Create the home you want while adding value.
FHA 203(k) Loan Pros and Cons
Like any loan program, FHA 203(k) financing has trade-offs. Here is a quick, balanced look.
Pros
Finance purchase and repairs in one loan
Down payment as low as 3.5%
Good for fixer-uppers and value-add homes
Ability to finance small and large scale rehab work
Improve home value and livability
Cons
More paperwork than a standard FHA loan
Contractor estimates and documentation required
Repairs must follow lender and program rules
Can take longer to close
Primary residence only
PROGRAMS COMPARED
FHA 203(k) vs. Other Renovation Loans
|
Program
|
Best For
|
Occupancy
|
Repair Scope
|
Investor Friendly
|
|---|---|---|---|---|
|
FHA 203(k)
|
Buyers and homeowners using FHA financing
|
Primary residence only
|
Limited or Standard repairs
|
No
|
|
HomeStyle Renovation
|
Conventional borrowers wanting flexibility and luxury additions
|
Primary, second home, and investment
|
Wide range of repairs and improvements
|
Yes
|
|
VA Renovation
|
Eligible veterans and service members
|
Primary residence only
|
Repairs and improvements up to $75k
|
No
|
|
Fix-and-Flip Loans
|
Real estate investors
|
Investment property
|
Rehab, resale, and value-add projects
|
Yes
|
Contractor & Repair Escrow
With an FHA 203(k) loan, funds for repairs are usually not handed directly to the borrower. Instead, the lender typically holds the money in escrow and releases it to the contractor as work is completed and inspected. This process helps ensure the work is done properly and protects both the borrower and the lender.
At closing, contractors receive an initial draw to start the project. It is common for most FHA 203(k) loans to have up to 5 draws maximum.
Additionally, with the Standard FHA 203(k) loan, borrowers may finance up to 6 months of mortgage payments into the loan if the property is deemed uninhabitable by the FHA Consultant. This helps borrowers have some needed breathing room if they have to arrange temporary living at a hotel or short-term rental while the work is completed.
How Repair Escrow Works
A simple, lender-managed process from approval to completed work.
You and your contractor agree on the scope and cost.
Funds are placed in an escrow account.
Work is completed in stages.
Inspections are completed.
Funds are released to the contractor.
You enjoy your improved home.
Why Work With Andes Mortgage?
We are an independent mortgage broker. That means we shop renovation programs for you and guide you through every step.
Compare Renovation Programs
We compare FHA 203(k), HomeStyle, VA, and more to find what fits you best.
Lender Overlay Guidance
We help you understand lender requirements and streamline approvals.
Contractor & Process Guidance
We guide you through bids, scopes of work, and the renovation loan process.
Personalized Loan Strategy
We build a plan tailored to your goals and budget.
Related Resources
GOT QUESTIONS?
FHA 203(k) Loan FAQs
What is an FHA 203(k) loan?
An FHA 203(k) loan is an FHA-backed mortgage that allows eligible borrowers to finance a home purchase or refinance plus approved repairs into one loan.
How does an FHA 203(k) loan work?
You get approved for the mortgage, create a repair scope with a contractor, complete an appraisal based on the after-improved value, close on the loan, and then repair funds are held in escrow and released as work is completed.
What is the difference between Limited 203(k) and Standard 203(k)?
Limited 203(k) is generally used for smaller, non-structural projects. Standard 203(k) is used for larger or more complex renovations and may require a HUD consultant.
How much can I finance with a Limited 203(k)?
Limited 203(k) financing allows up to $75,000 in financed repairs and certain allowed costs, subject to FHA and lender guidelines.
Can I buy a fixer-upper with an FHA 203(k) loan?
Yes. FHA 203(k) loans are designed to help eligible buyers purchase homes that need repairs and include approved renovation costs in the mortgage.
Can I refinance with an FHA 203(k) loan?
Yes. FHA 203(k) loans may also be used for refinance transactions when the borrower wants to improve their current primary residence.
Are FHA 203(k) loans only for primary residences?
Yes. FHA 203(k) loans are intended for primary residences, not investment properties.
Do I need a contractor for an FHA 203(k) loan?
In most cases, yes. Lenders typically require contractor bids, a scope of work, and documentation before approving the renovation portion of the loan.
Are repair funds paid directly to me?
Usually no. Repair funds are typically held in escrow and released to the contractor as work is completed and inspected.
Is FHA 203(k) better than HomeStyle Renovation?
It depends. FHA 203(k) may be better for borrowers who need FHA financing or a lower down payment structure, while HomeStyle may be better for conventional borrowers or certain property types.
How long does an FHA 203(k) loan take to close?
FHA 203(k) loans can take longer than standard FHA loans because contractor bids, renovation review, and additional documentation may be required.
Can I do the repairs myself?
Some programs may allow limited borrower-completed work in very specific cases, but most lenders prefer or require licensed contractors. This depends on the lender, scope of work, and program rules.
Thinking About Buying or Refinancing a Fixer-Upper?
Compare FHA 203(k) loan options and find the right renovation financing with Andes Mortgage.