FHA 203(k) Loans: Buy a Fixer-Upper with One Loan

You found the perfect neighborhood. The only problem? The only house you can afford needs major work. That's exactly what the FHA 203(k) loan was built for.

Two types of 203(k) loans

• Limited 203(k): For renovations up to $35,000. Covers cosmetic work, flooring, appliances, paint, minor kitchen remodels. Faster and simpler.
• Standard 203(k): For renovations over $35,000. Requires a HUD consultant, detailed plans, and more paperwork. Covers structural work, additions, major systems.

How it works

The loan amount is based on the after-repair value of the home, not the purchase price. So you borrow enough to buy the house and fix it up, all in one mortgage.

Example: You buy a $250k home that needs $50k in repairs. Its after-repair value is $330k. The loan is based on that $330k value, and you get a $300k loan (with 3.5% down) that covers both purchase and repairs.

The good stuff

• Same low 3.5% down payment as a standard FHA loan.
• One loan, one closing, one set of payments.
• You can move in right away (if the work doesn't affect livability) or wait until completion.
• Sweat equity: your home is worth more than you paid the day renovations finish.

What to watch for

• Contractors must be licensed and approved by the lender.
• The standard 203(k) process is slow — expect 60-90 days to close.
• Interest rates are slightly higher than standard FHA.
• You can't do the work yourself (unless licensed).

The takeaway: The 203(k) turns "this house needs work" from a dealbreaker into an opportunity. Just budget extra time and patience for the process.