FHA 203K Loans

There are two types of FHA 203K loans. The type you need depends on the type and cost of the renovations. The two loans are the Limited 203K loan and the Standard FHA 203K loan.

Both loans provide funds to buy and renovate the property, the difference is in the type of renovations you can do and how involved the lender is in the process.

Limited FHA 203K Loan

The limited FHA 203K loan (sometimes called the streamline FHA 203K loan), is mostly for borrowers looking to make cosmetic changes. You cannot make any structural changes with this loan, but the paperwork to complete the process is much less intense.

A key factor in qualifying for the limited FHA 203K loan is whether the home is livable. If you can live in the home during the renovations, it might be eligible for the limited 203K program.

The other determining factor is the cost. The limited 203K loan additional loan funds of up to $35,000 in addition to the acquisition costs. The $35,000 includes the 15% emergency buffer required should the unexpected occur. This means your renovation costs can be up to $31,000, leaving enough room for the buffer.

As we said, the renovations must be non-structural, and they must also be ‘non-luxury.’ The options are endless, but here are some renovations you can make with the FHA 203K loan:

  • Minor (non-structural) kitchen and bathroom renovations
  • New flooring
  • New paint (interior or exterior)
  • New roof
  • New windows and doors
  • New appliances
  • Accessibility changes for people with disabilities
  • Basement remodeling (non-structural)
  • Any other minor renovations

Obviously, these changes do not include any room additions, knocking down walls, or addition of walls.

With the limited 203K program, contractors receive their payments in 2 installments. They receive 50% when work begins (when the loan closes) and the remaining 50% when the work is complete and approved.

Standard FHA 203K Loan

The standard FHA 203K loan doesn’t have the same limits as the limited 203K loan, but the process is more detailed.

With the standard rehab loan, you don’t have dollar limits or any limits on the renovations you can do. Room additions, changes to load-bearing walls, and most other renovations are acceptable with this program.

So what’s different?

Besides the dollar amount and allowed work, the standard 203K is a more detailed process. You’ll be assigned a loan consultant who is your go-to person when dealing with the contractors and the financing. Things can get confusing, including when disbursements go out and when work is approved, but the consultant is with you every step of the way.

Since there really isn’t a limit to the renovations you can do with a standard 203K loan, here is what you can’t do with it:

  • Adding any luxury amenities
  • Minor landscaping projects
  • Any renovations that can’t be completed within 6 months

Basically, any structural changes, room additions, or even moving the home to a different site can be financed, as can major landscaping projects, converting a home to a multi-family unit, or completing renovating the entire home as long as the scope of the project can be completed within 6 months.

Are you looking to get Pre-Approved?

STANDARD 203(K)

The Standard 203(k) may be used to purchase or refinance a home that needs remodeling and/or structural repairs. There is a minimum rehabilitation cost of $5,000 and the use of a 203(k) consultant is required.

Max completion time: 180 days (6 months)

Landscaping and hardscaping allowed

$5K minimum and no max repair amount

Structural changes are allowed

LIMITED 203(K)

The Limited 203(k) may be used to purchase or refinance a home that needs minor remodeling and non-structural repairs not exceeding $35,000. The use of a 203(k) consultant is not required and there is no minimum rehabilitation cost.

Minor remodeling

HUD consultant is not required

Max completion time: 90 days (3 months)

No min and up to $35K in total renovations

Our goal is to provide excellent customer service.

Jessica Ellis

Loan Originator NMLS #: 2357124 Continue Reading Jessica Ellis

Lori H

I’ve had the best experience for being a first time homebuyer,everyone was beyond helpful and explained all the steps in detail to someone with zero knowledge of the home buying process.

David A

My City was fantastic to work with. They were extremely knowledgeable and answered all questions quickly.

About the loan

This loan program provides financing to buy fixer-uppers and to fix them up all in one loan. It’s a great loan program that helps people buy homes they want and make them look how they want all without breaking the bank.

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