FHA 203(k) Home Renovation Loan

FHA 203(k) home renovation loan backed by the Federal Housing Administration (FHA) is a mortgage option that finances the purchase, refinance and renovation costs of a home. These loans are great when you need funds to buy or refinance a property, as well as need more money to make repairs and upgrades to the property.

Usage of FHA 203(k) Limited Renovation Loan

FHA 203(k) loans can cover:

• Structural modifications and partial reconstruction
• Improvements to the home's functions and look-n-feel as per latest house trends
• Modifications to make a house safe
• Remodel a kitchen
• Reconditioning or replacing plumbing and installing a well and/or septic system
• Adding or replacing roofing, gutters, and downspouts
• Install an outdoor deck
• Adding or replacing floors and/or floor treatments
• Major landscape work and site improvements
• Enhancing accessibility for a disabled person
• Making energy conservation improvements

Highlights of FHA 203(k) Home Renovation Mortgage

• A 203(k) loan can be used to finance a single family home, duplex or 2-4 unit property.
• Homebuyers and homeowners can quickly and easily tap into cash to pay for property repairs or improvements.
• Excellent for purchasing and/or upgrading a new or existing home with both small renovations and major repairs.
• A single mortgage can cover both the purchase and rennovation costs.
• An FHA 203(k) loan is a government-backed mortgage.
• Must plan to live in the home during or after renovation, for at least one year.
• Can't be used for renovate a rental property. For multi-unit properties less than five attached units, you must live in one of the units.

Eligible Properties

• Single-family homes or FHA-approved Condominiums.
• Multi-unit properties with less than five attached units.

Eligibility Requirements for FHA 203(k) Home Renovation Mortgage

To qualify for an FHA 203(k) home renovation loan, you must meet the following requirements:

• Credit score: A minimum credit score of 640 is required.
• Down payment: A down payment of at least 3.5% is required.
• Residency: Must use property as primary residence during or after renovation, for at least one year.
• Debt-to-income ratio: Your debt-to-income (DTI) ratio must be less than 44 percent.
• Loan amount: Loan amounts up to 110% of the home's after-improved appraised value but cannot exceed the FHA loan limit, which vary by county.
• A construction contract with a state-licensed general contractor is required.
• Property Type: Must be a one- to four-unit dwelling.
• Mortgage insurance: Borrower is required to a pay upfront and annual FHA mortgage insurance premiums.

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