FHA loans

FHA 203(k) loans: buying a home and financing the repairs together

A fixer-upper can be a way into a neighborhood you could not otherwise afford, but most buyers do not have cash for both a down payment and a renovation. FHA's 203(k) program lets you finance the purchase and the repairs in one mortgage, with rules on what work is allowed and how money is released.

Reviewed November 2026 · Written for Buy Home Tips from the sources listed below

Section 203(k) is FHA's rehabilitation mortgage program. Instead of buying a home with one loan and paying for repairs with cash or a separate loan, you borrow for both at once. The CFPB notes that separate construction loans are usually short term with higher rates. A 203(k) folds the work into a long-term FHA mortgage.

Who it suits

A 203(k) can fit buyers who find a home with outdated systems, needed repairs or a layout they want to change, especially if the home would not meet FHA's property standards as is. It is less suited to buyers on a tight deadline, because bids, reviews and draws add steps.

Limited 203(k)

HUD Mortgagee Letter 2024-13 raised the Limited 203(k) ceiling. For FHA case numbers assigned on or after November 4, 2024, the Limited 203(k) may be used for minor remodeling and nonstructural repairs with total rehabilitation costs up to $75,000. There is no minimum, and a 203(k) consultant is optional. HUD said it will review that limit each year alongside its loan limits.

The handbook rules out a Limited 203(k) when, among other things, the work is expected to take more than nine months, needs a consultant to write up the repairs, requires plans or architectural exhibits, or keeps you out of the home for more than 30 days.

Standard 203(k)

A Standard 203(k) is for larger projects, including structural work. HUD's FHA Connection help pages describe it as requiring a minimum repair cost of $5,000 and an FHA-approved 203(k) consultant. The consultant inspects the property and prepares a work write-up and cost estimate listing each repair. The rehabilitation period can run up to 12 months, and the loan can include up to 12 months of mortgage payment reserves while the home cannot be occupied.

Contingency reserves

Old houses hide surprises. HUD's handbook sets contingency reserves as a percentage of the repair costs, generally between 10 and 20 percent, with the minimum depending on the age of the structure and issues such as termite damage or utilities that do not work.

How the loan size is set

For a purchase, HUD's handbook works from the lesser of two figures: the adjusted value plus the financeable repair costs, fees and reserves, or 110 percent of the after-improved value (100 percent for condominiums). The standard FHA loan-to-value ratio, 96.5 percent for borrowers with a minimum decision credit score of 580 or higher, applies to that figure, and the county FHA limit caps it.

Draws and contractors

Repair funds are not handed over at closing. They are held in an account and released as work is completed and inspected. For a Standard 203(k), the handbook allows up to five draw requests, four intermediate and one final, and the lender must release funds within five business days of a properly executed draw request. HUD's 2026 handbook update also increased the number of draws allowed under the Limited 203(k). Contractors need to be comfortable with this payment schedule, so ask about it before you hire.

Questions to ask lenders

Do you make Limited and Standard 203(k) loans, and how many a year?
How do you handle draws, and how long do inspections take?
Which costs can be financed, including consultant fees and permits?
What happens if bids come in higher after closing?

The bottom line

A 203(k) lets you finance a home and its repairs in one FHA mortgage. Use a Limited 203(k) for nonstructural work up to $75,000 and a Standard 203(k), with a consultant, for bigger jobs. Get bids early, budget a contingency and expect the work to be paid in stages.

Mini calculator: a rough 203(k) loan size

Enter the price, repair estimate, contingency and the appraiser's after-improved value. The result applies 96.5% to the lower of total cost or 110% of that value.

Purchase price ($)

Repair and improvement costs ($)

Contingency reserve (% of repairs)

After-improved value ($), 0 if not known

Enter your figures to see the result. Nothing you type leaves this page.

Simplified. Real 203(k) math also adds financeable fees and payment reserves, uses the adjusted value and is capped by the county FHA limit.

Planning a 203(k) purchase

Find a lender that actively makes 203(k) loans.
Get contractor bids before or soon after your offer.
Decide with your lender whether the work fits Limited or Standard.
For Standard, budget time for a HUD-approved consultant's work write-up.
Add a contingency reserve to the repair budget.
Plan where you will live if the home cannot be occupied during work.

Questions buyers ask

What is an FHA 203(k) loan?

It is an FHA-insured mortgage that combines the purchase price and the cost of repairs or improvements in one loan. Repair money is held and released as the work is completed.

What is the difference between Limited and Standard 203(k)?

HUD's rules allow a Limited 203(k) for minor remodeling and nonstructural repairs with total rehabilitation costs up to $75,000 and no consultant required. A Standard 203(k) covers larger or structural work, requires at least $5,000 of repairs and an FHA-approved 203(k) consultant.

How long do I have to finish the work?

Under HUD Mortgagee Letter 2024-13, the rehabilitation period is up to nine months for a Limited 203(k) and up to 12 months for a Standard 203(k).

Can I do the work myself?

HUD's handbook allows borrowers to do some work under a Rehabilitation Self-Help Agreement. The consultant must list each item you will do on the work write-up, and you are not reimbursed for your own labor.

Sources checked for this page

Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.