Did You Know?

FHA loans are one of the best options for young, first-time home buyers who have not had as much time to save for a large down payment or establish a high credit score.

Get an FHA Refinance Loan
Get an FHA Purchase Loan
Get an FHA Refinance Loan
Get an FHA Purchase Loan
Click to Start Your Refinance or Purchase Loan

FHA Programs for Fixer-Upper Homes

FHA Programs for Fixer-Upper Homes
Many homebuyers choose to buy properties that aren’t exactly the “dream home,” but have the potential to be. They buy “fixer-upper” homes with the intention of renovating the entire house or parts of it. Some homeowners also decide to renovate their homes to get a better price for it when they sell. For some, this could mean updating the kitchen or adding a guest bathroom. For others, it could mean gutting and upgrading the entire home, room by room.

The FHA 203(k) Rehabilitation Loan

The fact is that repairs and renovations to your home cost a lot of money. Luckily, the FHA has an option for those with fixer-uppers on their hands. The FHA 203(k) Rehabilitation Mortgages allows borrowers to finance the funds for renovations to a home. This loan program can be used for purchasing a home, and if can also be secured as a refinance if you already have a mortgage on it.

In the case of a home purchase, the loan covers the purchase as well as the rehabilitation of the home, as part of a single mortgage. This loan can be used to finance a property that is at least one year old. Part of the funds go toward paying the seller, and the rest is placed in an escrow account, disbursed as rehabilitation goes on.

Additionally, the refinance option is not exclusively for FHA borrowers. If you need funds for renovation on a home you are currently paying off with a conventional mortgage, you can refinance to the FHA 203(k) Rehabilitation Mortgage.

The FHA Rehabilitation Loan comes with all of the flexible borrower guidelines that the FHA offers on its other mortgage and refinance programs. However, there are a few other factors that come into play. To qualify for an FHA Rehab Loan, the total cost of repairs must amount to at least $5,000. The FHA Loan Limits still apply, so the total value of the property must fall within the lending limits for that area. With Rehabilitation Loans, the property value is determined by whichever is less:
  • The home’s value before rehabilitation plus the calculated cost of repairs, or 
  • 110% of the appraised value of the property after repairs. 
The Limited Loan 

There are some remodeling projects that aren’t as extensive as others. You may not need an entire home loan to afford the renovations you have in mind. In that case, there is a “limited” version of the 203(k) Rehab Loan that lets you borrow without committing to the full mortgage. FHA's Limited 203(k) program lets borrowers finance up to $35,000 for renovations. 

To qualify for the limited version of the FHA Rehab Loan, the renovations need to meet some requirements. Here are some of the factors that disqualify a borrower:
  • The renovation timeline is expected to be six months or more.
  • The project requires more than two payments per specialized contractor.
  • The required repairs in the appraisal require a consultant to develop a specification of repairs.
  • The repairs require plans or architectural exhibits.
If you are considering an FHA Rehabilitation Loan, your best option is to speak to a lender about your options. Depending on the scope of repairs and/or upgrades, you might need to opt for the entire refinance rather than the limited version of the loan. Keep in mind that lender overlays apply, and that may affect your decision.

You may also be able to combine the FHA 203(k) Rehab Loan with other FHA programs, such as the FHA Energy-Efficient Mortgage option. Ask your lender about these add-ons, and see what the best course of action is for you and your home!


Disclosures Give Transparency to Borrowers
Understanding the Purpose of Your Mortgage Down Payment
Putting Money Into Your Escrow Account
See Your Credit Scores From All 3 Bureaus
See Your Credit Scores From All 3 Bureaus

FHA Loan Articles

When not to Consider Refinancing a Home

There are plenty of reasons to delay plans to refinance a home. One reason has made big headlines. When borrowers face higher interest rates than originally approved for, that is a good reason to wait to refinance.

How FHA Construction Loan Draw Disbursements Work

When you are approved for an FHA One-Time Close Construction loan, you get a single loan that pays for both the costs to build the house, and serves as the mortgage. One application, one approval process, and one closing date.

Mortgage Rate Predictions for 2024

In the last days of November 2023, mortgage loan rates flirted with the 8% range but have since backed away, showing small but continued improvement. What does this mean for house hunters considering their options to become homeowners soon?

Is It Cheaper to Buy a Home With an FHA Loan or to Rent?

In May 2023, USA Today published some facts and figures about the state of the housing market in America. If you are weighing your options for an FHA mortgage and trying to decide if it’s cheaper to buy or rent, your zip code may have a lot to do with the answers you get.

Why Do FHA Loans Have Borrowing Limits?

FHA loan limits serve as a crucial mechanism to balance financial sustainability, regional variations in housing costs, and the agency's mission to promote homeownership, particularly for those with limited financial resources.

FHALoan.com is not a government agency. We do not offer or have any affiliation with loan modification, foreclosure prevention, payday loan, or short term loan services. Neither FHALoan.com nor its advertisers charge a fee or require anything other than a submission of qualifying information for comparison shopping ads. We do not ask users to surrender or transfer title. We do not ask users to bypass their lender. We encourage users to contact their lawyers, credit counselors, lenders, and housing counselors.

SecureRights Advertiser Contact Information