Renovation Mortgage 203(k): Buy a Home + Renovate With One Loan
Renovation Mortgage 203(k): Buy a Home + Renovate With One Loan
WHAT IS A 203(k) RENOVATION LOAN?
A 203(k) loan is an FHA-backed mortgage that lets you finance the home purchase (or refinance) and renovation costs into one mortgage.
Instead of trying to save for repairs after buying, you build the renovation budget into the financing — often making better homes accessible at better value.
WHY BUYERS LOVE 203(k)
Make it perfect
Buy "the ugly house" and buy potential — not perfection. Customizing your home from day one.
Increase value
Strategic renovations may increase your home equity immediately upon project completion.
One closing
Simplify your life by avoiding multiple loans and separate closing costs for your repairs.
Expand options
Fixer-uppers significantly increase your choices when housing inventory is tight.
TYPES OF 203(k) LOANS
203(k) Limited
Best for smaller repairs and non-structural improvements. Typically capped at $35,000 in renovation costs.
203(k) Standard
For larger projects, structural changes, or total remodels. Involves more oversight and a 203(k) Consultant.
WHAT CAN BE FINANCED?
- Kitchen & Bath remodels
- Flooring & Painting
- HVAC & Roof replacements
- Plumbing & Electrical
- Accessibility upgrades
- Energy efficiency items
HOW THE MONEY WORKS
Purchase & Close: You close on the home and the loan at the same time.
Escrow Account: Renovation funds are placed in a secure escrow account.
Draw Process: Contractors are paid in stages as work is inspected.
Completion: Project is finalized and funds are fully disbursed.
PROS & CONSIDERATIONS
Pros
- ✔ Finance improvements into one payment
- ✔ Low down payment options (FHA)
- ✔ Projected value appraisal
- ✔ One-time closing cost
Considerations
- ⚠ Required contractor approvals
- ⚠ More paperwork than standard FHA
- ⚠ Renovation timeline restrictions
FAQ — 203(k) RENOVATION LOANS
Generally, no. HUD requires work to be done by qualified, licensed contractors to ensure completion and safety.
For Limited, up to $35,000. For Standard, it depends on the "After-Improved Value" of the home and FHA loan limits in your area.
A consultant is required for the Standard program but not for the Limited program.
Important Disclosure
203(k) loans are subject to credit and property approval. Contractor documentation and specific HUD guidelines apply. Final loan amounts are based on the lower of the purchase price plus renovation costs or the after-improved value.
Build your own perfect home.
Let's customize your 203(k) renovation strategy today.
