How to Finance Home Renovations with the FHA 203k Mortgage

Posted by Laine Smith on 2/5/17 11:00 AM

Topics: Home Ownership

Fixer-upper listings have recently been on the rise, according to a recent Zillow analysis. The number of homes listed with descriptive terms like “needs work” and “TLC” is up 12 percent from five years ago. But how does a homebuyer finance those home renovation projects? Today, we’re highlighting one of the most popular financing options borrowers, the FHA 203k loan.


What is the FHA 203k?

Essentially, the 203k is a unique loan meant for homebuyers purchasing a home in need of repair or rehabilitation or homeowners who want to refinance the costs of repairs into their home loan. An FHA 203k loan allows borrowers to get just one mortgage loan to finance both the ownership of the property and any renovations, rehabilitation or improvements.

What Makes a Home & Borrower Eligible for the FHA 203k?

The FHA 203k is only available for financing of primary homes. FHA 203k loans allow borrowers to finance up to 96.5 percent of the appraised value of their home, which is based on the value after improvements or repairs are completed. This requires a 3.5 percent down payment from borrowers, which can be gifted following FHA guidelines.

The FHA 203k comes in two varieties, streamline and standard, for varying ranges of renovation.


  • For homes needing minor, non-structural repairs
  • Financing up to $35,000 in improvements before move-in
  • No minimum repair costs
  • Eligible improvements include roof repair, plumbing and electrical systems, flooring, decks, minor kitchen/bathroom renovations, etc.


  • For homes needing major rehabilitation
  • No maximum financing for renovations as long as the mortgage amount stays within county guidelines for FHA loans
  • Renovation/repair costs must exceed $5,000
  • Eligible improvements include all of the 203k Streamline improvements, as well as structural alterations like room additions, major kitchen/bathroom remodeling, basement finishing, etc.

To learn more about how to finance home renovations, download our free Rehab & Construction Guide and contact one of our mortgage bankers to get pre-approved.

Download: Rehab & Construction Guide

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