A government-backed way to finance a house and its repairs together.
The FHA 203(k) is the government-backed version of a renovation mortgage. It lets you buy or refinance a house and roll the cost of repairs into a single FHA loan, often with a small down payment.
For a buyer with modest savings looking at an older house, that can open doors. But it’s the most rule-heavy loan on this list.
Know which version you need before you write an offer.
A 203(k) is an FHA-insured first mortgage that covers the purchase or refinance plus eligible repairs and improvements. The loan amount is based on the home’s value after the work, and the repair money is held back and paid out in draws as work gets done. HUD’s 203(k) page covers the program.
It’s only for owner-occupants. You have to live in the house as your primary residence. Investors can’t use it.
There are two versions, and picking the right one matters.
The Limited 203(k) is for smaller, non-structural work. Since HUD’s 2024 update, it covers up to $75,000 in repairs, up from $35,000. Think kitchen and bath remodels, flooring, a new roof, new mechanicals, paint. No moving walls or other structural changes, and you can’t be out of the house for more than 30 days. A consultant is optional. Work has to be done within 9 months.
The Standard 203(k) is for bigger projects, with a $5,000 minimum and structural work allowed: additions, moving walls, major rehab. It requires a HUD-approved 203(k) consultant, and work has to be finished within 12 months. If you can’t live in the house during construction, up to 12 months of mortgage payments can be financed into the loan.
If there’s any chance the job turns structural, start with the Standard. Switching mid-stream is painful.
On a Standard 203(k), a HUD-approved consultant inspects the house, writes up the scope and cost of the work, and then inspects each draw before money is released. HUD sets maximum fees for each step. For example, the work write-up is $1,000 on repairs up to $50,000, and each draw inspection is $375. Those fees can be financed into the loan.
A good consultant is worth having. They keep the scope realistic and the draws moving. On a Limited 203(k), you can choose to use one.
A 203(k) is built around making a house safe, livable and improved, not luxurious. Lenders generally won’t finance things like a new pool, hot tub or outdoor fireplace. It also can’t be used on a vacation home or rental.
If your plans lean toward high-end or unusual work, Fannie Mae’s HomeStyle is usually more flexible.
Down payments can be as low as 3.5 percent, per the CFPB, generally with a credit score of 580 or above. Many lenders set their own higher minimums for 203(k) loans, often in the 620 to 640 range.
FHA loans carry mortgage insurance. There’s an upfront premium of 1.75 percent of the loan, usually financed, plus an annual premium, currently around 0.50 to 0.55 percent on most 30-year loans, per HUD. With less than 10 percent down, that annual premium stays for the life of the loan. That’s a real cost to weigh against a conventional renovation loan.
Add consultant fees, inspection fees and normal closing costs, and it’s worth asking a lender to price a 203(k) next to a HomeStyle loan for the same house.
FHA caps the loan amount by county. For 2026, all three of our counties sit at FHA’s national floor, which is $541,287 for a single-family home, per HUD’s 2026 limits. That cap includes the repair money. Your lender can confirm the current figure with HUD’s lookup tool.
The repair funds sit in escrow and get released in draws. As of 2026, HUD allows up to four draws per contractor on a Limited 203(k) and up to five on a Standard. Each draw is inspected before it’s paid, and payments typically go out as two-party checks to you and the contractor. The final draw waits on a completion inspection and a title update showing no liens.
A contingency reserve is common, and required on older homes under the Standard program. That money is there for the problems you find after the walls are open.
It takes longer. Bids, a consultant’s write-up, an as-completed appraisal and lender review all happen before closing. Build that into your purchase timeline.
Contractors have to buy in. Not every contractor will take 203(k) work because of the paperwork and waiting between draws. Ask early, and expect the lender to want license and insurance information.
Changes go through the lender. Change orders need approval and can carry fees.
DIY is usually off the table. Many lenders require licensed, insured contractors for all of the work.
What is the maximum for a Limited 203(k)?
$75,000 in repair costs, following HUD’s 2024 update. Projects above that, or any structural work, need a Standard 203(k).
Can I use a 203(k) on an investment property?
No. The home has to be your primary residence.
Do I need a 203(k) consultant?
Yes on a Standard 203(k). It’s optional on a Limited 203(k).
How long do I have to finish the repairs?
Generally 9 months on a Limited 203(k) and 12 months on a Standard 203(k), under HUD’s 2024 rules.
This page is general information, not financial advice. Smego Construction is not a lender, mortgage broker or financial advisor, and nothing here is a recommendation about your particular circumstances. Loan products, eligibility and terms change and vary by lender — confirm anything here with a qualified lender before making a decision.
Fifteen minutes on the phone. You’ll have a realistic range before we hang up — and if we’re not the right people for it, I’ll tell you.