FHA 203k Loan Requirements: 1 Simple Checklist You Can Use

fha 203k loan requirements
  • An FHA 203k loan allows homeowners to combine the price of a house with the renovations of the house into a single mortgage.
  • A limited 203k loan has a renovations maximum limit of $35k and deals with minor renovations.
  • A standard 203k loan deals with major renovations and has a minimum limit of $5k.
  • 203k loans require renovations to be completed within 6 months.
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Have you found a fixer-upper in the perfect location and want to know if there is a loan that will cover both the purchase of the home as well as the renovations?

Well, you might be in luck, because the FHA 203k loan was created for exactly that.

We’re going to tell you everything you need to know about the FHA 203k loan, what the requirements are, what to expect in the application process, and things you need to consider before pursuing this loan.

What is an FHA 203k Loan?

An FHA 203k loan, otherwise known as a rehab loan or renovation loan, is backed by the Federal Housing Administration (FHA) and finances both the purchase of a property as well as the renovation costs with one mortgage.

Like the requirements for an FHA loan, the requirements for this loan are generally more flexible than conventional renovation loans.

This makes it a great option for potential homeowners who may not have the best credit or cannot meet other requirements of conventional loans. It’s also a great option for homeowners who do not want a separate additional loan for home renovations.

This pros and cons list displays the main benefits and disadvantages of this loan.

Lower credit score and down payment required than conventional loansThe property must be your intended primary residence so it cannot be used as an investment property
Competitive interest ratesYou may have to hire a HUD consultant and professional contractors
One single loan for both property purchase and renovationsYou most likely can’t do the renovations yourself without approval
Can cover mortgage payments when the home is not habitable during renovationsCannot use the loan for any ‘luxury’ renovations like adding swimming pools
Mortgage insurance is required

How Does an FHA 203k Loan Work?

There are two kinds of 203k loans you can apply for.

1. Limited 203k loan (also known as a Streamline 203k loan)

This loan is meant for homes that do not require major or structural repairs. Some of the repairs that can be covered by this loan include:

  • Cosmetic bathroom and kitchen remodel
  • Carpeting or flooring
  • Painting
  • Energy-efficient home improvement
  • Septic system improvements
  • Appliance replacement

There is no minimum limit to the costs of these renovations but there is a maximum limit.

The maximum amount allowed for renovations is $35,000.

If you are looking to do nothing more than cosmetic repairs, this might be the better option for you.

2. Standard 203k loan

This loan is meant for major renovations. Some of the work that can be covered by this loan include:

  • Structural alterations or repairs
  • Convert single units into 2-4 units
  • Full bathroom and kitchen remodels
  • Major landscaping projects
  • Constructing additions
  • Renovations requiring architectural drawings
  • Making a home accessible for a disabled person

To qualify for this loan, the renovation costs must be at least $5,000.

There is no official maximum limit for renovation costs but the FHA does have loan limits that vary depending on the value of your home and the county your property is in. Check your county’s loan limit here.

The price of the property plus the renovations should not exceed the loan limit.

Also keep in mind that you may not always qualify for the maximum FHA loan amount due to your credit score or other factors, so determining how much FHA loan you might qualify for is an important step in your planning.

Lastly, this 203k loan also generally takes longer to get, and you MUST hire a U.S. Department of Housing and Urban Development (HUD) consultant to oversee your home’s renovation process from the planning stage to the completion of the project.

Renovation limits

While a 203k loan will cover most renovations, there are limits to what the loan can cover.

Some of the home improvements that this loan will not cover are:

  • Luxury additions like swimming pools, hot tubs, tennis courts, gazebos, etc
  • Minor landscaping
  • Furniture
  • Renovations that will take longer than 6 months.

Requirements for an FHA 203k Loan

requirements for an fha 203k loan

Here are the requirements for the 203k loan.

Property Requirements

  • Must be used as homeowner’s primary residence
  • Homeowner must live at the home for at least 12 months before renting or selling
  • Can be a single-family dwelling or multi-family dwelling
  • Must not be a mixed-use property (residential and commercial)
  • 1-4 unit family home must have been completed for at least a year
  • You can tear down and rebuild as long as the foundation remains intact

Renovation Requirements

  • Renovations must be complete within 6 months
  • Luxury renovations (e.g. swimming pools, tennis courts) cannot be included
  • Must hire a HUD-approved consultant for standard 203k loan renovations Find an approved consultant here
  • All renovations must be done by a licensed contractor
  • No DIY work without lender’s approval
  • Planning must be done before loan approval
  • Renovations must begin within 30 days of closing
  • All renovations must be up to code

Loan Limits

  • Limited 203k loan – Maximum $35,000
  • Standard 203k loan – No official maximum. Maximum is determined by the value of the property and the county the property is in.

How to Qualify for an FHA 203k Loan

Here are some of the eligibility requirements needed to qualify for a 203k loan.

Credit Score

The official minimum credit score for an FHA loan is 500, but many local lenders set their own credit score requirements. This low credit score limit makes this loan an attractive option for potential homeowners who don’t have the best credit for whatever reason.

Your credit score will, however, affect how much of a down payment you will need to make.

Down Payment

If you have a credit score of 580 or above you will need a minimum down payment of 3.5%


Your DTI measures how much of your gross income you use to pay your monthly income debts. Lenders will use this to determine your borrowing risk (i.e. the likelihood you will default on your mortgage).

To qualify for a 203k loan you generally need to have a DTI of 43% or lower.


You must be a U.S. citizen or a legal permanent resident to qualify for an FHA 203k loan.

Who Offers FHA 203k Loans?

We do. You can check our rates and your eligibility in 30 seconds for free.

Different lenders have different terms and limits concerning credit scores and documentation needed, so it is important for you to be clear on what you need to get approved by your lender of choice.

How to Apply for a 203k Loan?

The application process for a 203k loan is fairly straightforward but can also be time-consuming and complex. As long as you stick to the requirements of your chosen lender and work with renovation professionals, you should be able to get through the process and successfully get the loan.

Here are the steps.

1. Choose a lender

Find an FHA-approved local lender whose requirements you meet and whose rates you like. You can check our rates for this loan for free.

Once you’ve identified your lender of choice, you should compile all the documentation they require. These may include:

  • Credit reports
  • Income reports
  • Social security number
  • Letter to explain credit issues

2. Create a renovation proposal

Along with the documentation expected for most loans, you must also submit a renovation proposal as part of your application.

Within this proposal, you should include:

  • A description of all the work you want to have done
  • A detailed cost estimate that includes the cost of labor and all materials
  • Architectural plans and/or exhibits, especially for any structural renovations.

Your lender may insist that you get your cost estimates from a licensed contractor, so start shopping around for contractors before your application.

3. Hire a consultant to approve plans

If you applying for a standard 203k loan, you will need to hire a HUD consultant who will oversee the renovations. They will go over your renovation proposal and approve it before you get your loan.

4. Get an appraisal

The lender will have your home appraised. Unlike other home loans, they will appraise your prospective home for its current value and its ‘after-renovations’ value.

5. Closing

If all is in order, you will be able to close on your loan.

You may have to pay closing costs and origination fees up front or you may be able to negotiate for them to be included in your loan.

You will also need to pay your down payment which can range from 3% to 10% of your loan.

Once approved and once all closing costs are settled, your lender will lay out how your contractors will receive their payments and you can begin renovations under your HUD consultant’s supervision.

Is an FHA 203k Loan Right For Me?

is an fha 203k loan right for me

Whether a 203k loan is right for you, will depend on your circumstances and what you want to accomplish with the loan.

A 203k loan is a great option for homeowners wanting to renovate their dream home and who want a mortgage that offers good rates, lower down payments, and accepts lower credit scores.

If that’s you, give us a call and let us get you started on your 203k journey today.

Frequently Asked Questions

Can I refinance a 203k loan?

Yes, you can. It is very common to refinance FHA loans, and a FHA 203k loan is no different.

You can refinance from an FHA 203k loan to a conventional loan if you meet the requirements of a conventional loan like a higher credit score and what to enjoy better rates or a more favorable loan structure. You can also refinance into a 203k loan if you already have a mortgage and want to include remodeling costs in your monthly mortgage payments.

Can I use the FHA 203k loan to buy a multi-family property?

Yes. You can get a 203k loan for a multi-family property. However, the homeowner who is seeking the loan must live on the property and it must be their primary residence.

What is the interest rate on an FHA 203k loan?

The interest rate you are offered for your 203k loan is determined by the lender you settle on. In general, the interest rates for 203k loans are a bit higher than other FHA loans but generally lower than credit card rates and other conventional loan alternatives.