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FHA Renovation Loans
We know that not every home is move in ready, but that does not mean it is not the perfect fit. With FHA Renovation Loans, you can purchase or refinance a home and finance the cost of needed repairs or improvements all in one mortgage.
Whether you are updating a kitchen, replacing a roof, or doing a complete overhaul, renovation loans make it easier and more affordable to create the home you truly want.
Common Uses:
Foundation repairs
Room additions or layout changes
Energy efficiency improvements
What Is an FHA Renovation Loan?
FHA Renovation Loans, backed by the Federal Housing Administration, allow buyers or homeowners to finance both the purchase or refinance of a home and the renovation costs into a single mortgage. These loans are designed to support safe, livable homes while giving borrowers more flexibility when buying or improving property.
Who Qualifies for a Renovation Loan?
FHA Renovation Loans are designed to be flexible and accessible for a wide range of buyers. If you are looking to purchase or refinance a home that needs some work, you may be eligible. Here is what most borrowers need to qualify:
- While FHA loans are known for flexible credit standards, a minimum credit score of 620 is typically recommended. Some lenders may accept lower scores depending on other factors.
- These loans are for owner occupied properties. You must live in the home as your primary residence after renovations are complete.
- The home must be eligible for FHA financing and meet minimum property standards once renovations are completed.
Types of FHA Renovation Loans
Standard 203(k) Loan
The Standard FHA 203(k) is ideal for major renovations or structural repairs that require architectural drawings, engineering, or professional contractors.
Key Details:
- Minimum$5000 in repairs required
- Must be completed by licensed contractors
- Requires HUD approved consultant
- Can be used for single family homes, two to four unit properties, and some condos
Limited 203(k) Loan (Streamlined)
The Limited FHA 203(k) is perfect for smaller cosmetic updates or minor repairs that do not involve structural changes. Think of it as a faster option for light renovation projects.
Key Details:
- Renovation costs capped at $30,000
- No HUD consultant required
- Ideal for quicker projects
- Can be used for purchases or refinances
FHA Repair Escrow Loan
This option is used when a property needs minor repairs to meet FHA appraisal standards in order to close. It is often used when purchasing a home that is almost move in ready.
Key Details:
- Up to $5,000can be held in escrow
- Repairs must be completed within 90 days of closing
- No major renovations allowed
FAQ
Q: Do I need a general contractor?
A: For the Standard 203k loan, yes. A licensed contractor and HUD consultant are required. For the Limited 203k loan, a contractor is still needed, but a HUD consultant is not required.
Q: Can I do the renovation work myself?
A:
Generally, FHA does not allow do it yourself work, especially on structural repairs. Exceptions may be made for cosmetic work if the borrower is licensed and qualified, but this must be approved in advance.
Q: How long does the renovation need to take?
A: Work must typically be completed within six months of loan closing. FHA Repair Escrow loans require repairs to be completed within ninety days.
Q: Can I use this loan for investment properties?
A: No. FHA renovation loans are intended for owner occupied homes only. You must live in the property as your primary residence.
Q: Can I use gift funds for the down payment?
A: Yes. FHA loans allow gift funds from family members or other approved sources to be used toward the down payment or closing costs.
Let’s See What You Qualify For
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Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.
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