FHA 203k Loan: Requirements, Limits and How to Get One

An FHA 203k loan combines the cost of buying a home and making repairs into one mortgage. That means one closing, one loan, and one monthly payment. You can use it to purchase a home that needs work or refinance your current home to cover renovations.

The repair money doesn't go to you at closing. The lender holds it in an interest-bearing escrow account and pays contractors in draws as completed work is verified. FHA, part of the Department of Housing and Urban Development, insures the loan before a wall comes down. Take the rehab money out and it's a standard FHA purchase loan, Section 203(b).

If the home just needs things like fresh paint, new flooring, a roof, or an updated HVAC system, the Limited 203k may be a good fit. It covers up to $75,000 in repairs. For bigger projects involving structural changes or more detailed plans, you'll likely need the Standard 203k.

HUD's 203(k) rules also force the Standard when work runs past nine months, needs over four draws per contractor, keeps you out over 30 days, or fixes appraisal items needing a Work Write-Up or plans.

Pages quoting a $35,000 Limited cap and six months to finish run on rules HUD replaced in November 2024.

What can a 203(k) pay for?

Most permanent repairs and improvements to the house are eligible:

• Structural repairs, room additions, foundation work and added units (Standard only)
• Roof replacements, plumbing, electrical work, heating and cooling systems, wells, and septic repairs
• Remodeling kitchens and bathrooms, replacing appliances, and making energy efficient improvements
• Decks, porches, accessibility changes, and repairing an existing in-ground pool

Luxury items like new pools, outdoor hot tubs, tennis courts and gazebos are out.

Borrower requirements

To qualify, you meet the same flexible credit requirements as other FHA loans:

• A 580+ credit score for maximum financing (96.5% on a purchase); 500 to 579 caps you at 90% loan-to-value
• Debt-to-income that FHA's automated underwriting approves, or 43% total on a manual underwrite (up to 50% with compensating factors)
• A primary residence only, so investors are out

Lenders can set minimum scores above FHA's, so ask before paying for an appraisal; FHA's credit and income rules cover the rest.

Property requirements

The home must be at least a year old and have one to four units. Condos get interior work only, capped at 100% of the after-improved value, and mixed-use buildings must be at least 51% residential. A manufactured home qualifies if the work leaves its HUD-code structure alone (see our manufactured home rules). Building from scratch takes a ground-up construction loan.

Contractor and consultant rules

On a Standard, the lender picks a consultant off HUD's 203(k) Consultant Roster to inspect and write the Work Write-Up and Cost Estimate. HUD caps the fees ($1,000 for a write-up on repairs up to $50,000), and you and the consultant each certify you have no family or business ties.

Plenty of sites say every 203(k) job needs licensed contractors. HUD leaves licensing to local law. The lender checks each contractor's credentials and references, then confirms any license and bond required where the house sits.

At least 3.5% with a 580+ score, but FHA's lower down payment requirements apply to the whole project: the purchase price plus the rehab budget, or 110% of the after-improved value if that's lower.

Put dollars on it: a $280,000 house, $45,000 of rehab.

Illustrative: 30-year loan, 580+ score, as-is value at or above price; upfront MIP and closing costs not shown.

Budget 3.5% of the price alone and you'd be about $1,575 short, even with the strong appraisal.

A light appraisal hurts twice. The 110% cap shrinks the loan, and the difference comes out of your pocket. FHA also figures MIP LTV on the after-improved value, so the annual premium stays for the life of the loan. Get to 90% or less and it ends after 11 years.

The 1.75% upfront mortgage insurance premium can be rolled into your loan, but most closing costs on a purchase will need to be paid separately. The good news is that gift funds or down payment assistance from a government agency or HUD-approved nonprofit may help cover your upfront costs. You can also use our mortgage calculator to get an idea of what the full project will cost.

1. Start by finding a lender that offers FHA 203k loans, since not every mortgage company handles them. Once you find the right lender, get pre-approved based on the total cost of the home and the renovations you plan to make.
2. Make sure your purchase offer includes a 203k financing contingency. HUD requires the contract to state that you're applying for an FHA 203k loan and that the purchase depends on loan approval and your agreement to any additional repairs that may be required.
3. Get the work priced. A Standard gets the consultant's Work Write-Up; a Limited needs your work plan and a contractor's proposal split into labor and materials.
4. Order the appraisal. An FHA Roster appraiser values the home "subject to" the planned work.
5. Close once. You sign the Rehabilitation Loan Agreement, and the rehab money goes into escrow when the loan funds.
6. Start within 30 days and keep going. Work that hasn't started 30 days after funding, or stops over 30 days in a row, lets the lender call the loan in default. Draws go on form HUD-9746-A and are paid within five business days, minus a 10% holdback, against lien waivers.

Leave room in the contract's closing date for bids and the subject-to appraisal.

If you meet FHA's basic requirements, qualifying for a 203k loan usually isn't the biggest challenge. What tends to slow things down is the extra paperwork and coordination involved. Between the HUD consultant, contractor, appraiser, and inspector, everyone has their own schedule. If one person falls behind, the entire process can get delayed.

The fees add up, and your contractor has to live with draws and a holdback. The bigger risk is a stalled job, which can put the loan in default even with your payments current.

No, because you have to live there. HUD insures this rehab loan only for owner-occupants, plus approved nonprofits and local government agencies.

A house someone just flipped hits FHA's 90-day flip rule, and a 203(k) gets no pass. Sign within 90 days of the seller's purchase and FHA won't insure it; from day 91 to 180, a price at least double what the seller paid needs a second appraisal.

Investors buying to fix and sell need a fix-and-flip loan. A one-unit rental or second home can go on Fannie Mae HomeStyle, a conventional renovation loan that caps the work at 75% of the lesser of price plus renovation or as-completed value.

The rules are federal, but four details change a Texas renovation loan, starting with the county limit, rehab money included:

2026 limits. HUD posts new ones late each year. Look up any county on HUD's site or see every Texas county's FHA limit.

Texas has no statewide general contractor license, so the licensed contractors on a 203(k) are the trades: electricians and A/C contractors through TDLR, plumbers through the Texas State Board of Plumbing Examiners. For the general contractor, check local permit requirements, HUD credentials, and references to make sure they're qualified for the job.

On a regular FHA purchase, appraiser-required repairs fall under Paragraph 7E of TREC's resale contract, form 20-19. Nobody has to pay for them unless both sides agree in writing, and the buyer can walk if they top 5% of the sales price. With a 203k loan, you can roll those repair costs into your mortgage, but you'll still need to include HUD's required contingency in the contract.

A 203(k) refinance of your homestead can bring in Article XVI, Section 50(a)(5) of the Texas Constitution. The repair contract needs both spouses' written consent and a three-day right to cancel, and it can't be signed before the fifth day after your loan application or outside a lender's, attorney's or title company's office. Hold off signing a bid until your lender and title company clear the timing.