What is an FHA 203k Loan?

August 9, 2019
Author: New England Home Mortgage

What is an FHA 203k Loan?

An FHA 203k loan allows you to finance the house and the renovations needed. Backed by the federal government, these loans enable you to purchase a run-down or older home that other lenders would not be able to approve. With a 203k loan, you can buy and fix up a house in one transaction because the lender verifies repairs being made. These can be either fixed-rate for adjustable rate mortgages.

Qualifications and Requirements

To qualify for an FHA 203k loan, you must meet the following requirements:

  • Minimum credit score between 620 and 640
  • Down payment of 3.5%
  • House must meet certain standards

A house that can qualify for an FHA 203k loan can include:

  • One family or multi-family (between 1-4 units) home that has been completed for at least a year
  • A torn-down house, with some existing foundation remaining
  • A house that is being moved to a new location
  • Some condos are also eligible

Renovations that will qualify under an FHA 203(k) loan include:

  • Bathroom and kitchen remodels
  • Flooring
  • Plumbing
  • Siding
  • Additions to the house
  • Decks and patios


The main benefit of FHA 203k loans is that you can take out a mortgage on a home that would not be approved by other lenders due to livability issues. With a 203k loan, you can borrow money for repairs that you may not have been able to afford to complete without a mortgage. These loans are ideal for people who want to turn a fixer-upper into their dream home.


Not all properties qualify, and there is extensive paperwork to apply for the loan. In addition, you must work with a construction consultant and hire a licensed professional for all repairs. Extended closing time is common with 203k loans, often taking months before the deal goes through. Another downside is that not all renovations, especially those considered “luxury upgrades” can be paid for using this loan.


Finding the best loan for your personal needs can be overwhelming. New England Home Mortgage strives to help you understand all your options and find the best fit for your financial situation. Read an overview of mortgage options here, or contact us today for an in-person appointment.

(860) 736-2747
37 W. Center Street, Suite 208, Factory Square, Southington, CT. 06489