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FHA 203k- What is it

Posted on January 15, 2016 by Ray Williams.

FHA 203k-What is it and how do you get one?  Being one of the few local lenders in the Denver area that can provide a FHA 203k loan we have received quite a few calls lately looking into this loan option, so what is it?

An FHA 203k loan is a renovation loan.  It allows you to add in the costs of renovation into your mortgage.  It is not a second or a home equity line of credit (HELOC), it is in your first mortgage.  There are two options, one is the full (standard) or the limited (previously known as streamline).  The key difference between the two is determined by the cost of the renovation work as well as if you are doing any structural renovation (addition of rooms, removing of walls, etc.).  If you have any structural work being done it is automatically a full 203k.

When doing a full FHA 203k you are required to hire a general contractor as well as you are required to have a HUD consultant.  They are there for your protection.  We like to refer to them as the “big brother” on the project.  They will be making sure all proper permits are being pulled, all required work is being completed in a timely manner as well as inspecting the quality of work.

In order to qualify for a FHA 203k you need to qualify for an FHA loan, you can add as much work into a 203k as long as you are within FHA loan limits AND you qualify for the total mortgage amount with the renovation costs.  Of course it is hard to know what the costs of renovation may be on a home so this can become a little tricky.  The key is to make sure to discuss with your lender and know what your max purchase limit is for you, discuss the costs involved and the requirements for not only you but also the general contractor and HUD consultant if required.

These are really great loan loan options, they have helped many of our clients.  You can also do a FHA 203k for a refinance.  This is a great option because it allows many of us to put work into our home that we may not otherwise be able to fund.  Many times home equity lines of credit can have much higher interest rates and also have stricter lending guidelines (credit score, reserves, etc.).

If you are interested in a FHA 203k or have any questions please give us a call.

2 thoughts on "FHA 203k- What is it"

  1. Robert Nelson says:

    Are FHA 203K loans at a higher rate than regular refinance loans?

    1. Deana Manzanares says:

      Hi Robert,
      Good question, typically FHA 203k loans are slightly higher but most people choose them because of the leverage they have on completing a renovation for their home.

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