The 203k Renovation Mortgage Loan is a good way to get a brand new residence in need of improvements or fix up your existing house. Visualize it as a one-time-close construction loan but with more relaxed standards since it's guaranteed by FHA.

Below are some of the highlights and some useful information.


  • Permits repair/renovation costs to be added into the mortgage
  • Major items (similar to foundation repair) ARE allowed
  • Low down payment (3.5%) and the seller are allowed to still pay to as much as 6% of your mortgage closing costs
  • Close before the repair/rehab starts
  • Just one loan closing - money is disbursed on a draw basis after closing paid directly to the contractor
  • Buyer may incorporate possible upgrades (for instance silestone counters)

Examples of Repairs/Renovations

  • Foundation Repair
  • Install New Shingles
  • Paint Inside and Outside
  • Install New Carpet or Upgrade to Solid wood floors
  • Remodel Kitchen/Bath
  • Upgrade Heating, Ventilation, and Cooling
  • Refurbish Termite or Mold Damage
  • Energy Efficiency Improvements
  • Ugrade or Install Siding
  • Make House Handicap Accessible
  • Landscape designs/Exterior Updates
  • Latest/Upgraded Appliances
  • And More!

The Process

Accomplishing this is quite uncomplicated for those working with a professional mortgage advisor.

  • Consumer is pre-approved according to salary, investments, credit, and scope of project
  • Customers decides on house
  • Borrower meets consultant at home for inspection & feasibility study
  • Purchaser gets contractor proposal(s) and compares numbers with 203k consultant
  • Labor write-up is done by consultant
  • Home appraisal is executed "as completed" upon executed home purchase contract
  • All underwriting requirements is finished and sent to Mortgage underwriter
  • DE underwriter approves the home loan and the project
  • Loan closing papers are prepared and transmitted to the escrow business
  • Loan closes then rehab account is formed
  • Available funds are disbursed as work is done and inspected
  • Rehab is done & the consultant performs the final inspection
  • Now with the process done, you'll be able to enjoy your new house!

It is vital that you keep in mind a few items which are either NOT acceptable or ONLY permitted via exception: Any luxury item and/or improvement that does not become a permanent part of the subject house will not be eligible or would require an exception. Those items include:

  • Leisure or luxury enhancements, like pools, hot tubs, whirlpool baths
  • Barbecue pits, bath houses, tennis courts, satellite dishes, tree surgery
  • Additional or alterations to support commercial use or to equip or refurbish commercial use
  • Washer and Dryers

As you are able to grasp this can be a involved mortgage loan but working with the best mortgage banker makes all of the difference.