What is a 203K Loan?

An FHA 203k loan is basically the same as a regular FHA [called a 203(b)], but with a twist. An FHA 203k loan permits home buyers to finance repair and/or improvement costs into their mortgage to repair, improve or upgrade their home. With this loan option, home buyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a 203k Consultant, FHA approved inspector, FHA appraiser or home buyer preferences.

There are two types of FHA 203k Loans:

  • Standard/Full – There is a minimum rehab of $5,000 up to FHA maximum loan amount which varies by area. 
  • Streamline – Has no minimum and a maximum of $35,000, but cannot exceed FHA maximum loan amount. 

Basically the FHA 203k Standard/Full loan is more like a construction project, and the FHA Streamline 203k Loan is for more minor improvements.

An over-simplified example: Purchase price is $100,000. Upgrades/Repairs/Improvements will cost $50,000. Borrower’s base loan amount is $150,000 (not to exceed FHA maximum loan amount).