Qualifying for a FHA 203(k) loan

Single family homes along with duplexes, triplexes and four-plexes that are at least one-year-old are eligible under the FHA 203(k) program. The homebuyer must be an owner occupant; investors do not qualify for the program. Condominiums that have been pre-approved by the Federal Housing Administration (FHA) are also permitted under the program.

The 203(k) program can be used in one of three ways with one-to-four unit dwellings:

    • To purchase the dwelling and the land and then rehabilitate it
    • To purchase the dwelling and move it to another mortgaged property and then rehabilitate it
    • To refinance the borrower’s existing mortgage and then rehabilitate the dwelling


With the purchase of a condominium:

  • Owner occupants and qualified non-profit borrowers only…no investors
  • Rehabilitation is limited to the interior of the borrower’s unit
  • The lesser of either five units or 25 percent of all units in the condominium project can be under rehabilitation at the same time
  • The mortgage under the 203(k) program cannot exceed 100 percent of the after-improved value of the condominium

A FHA 203(k) insured loan can also be used to purchase a mixed-use residential property provided the rehabilitation funds are used solely to improve the residential part of the property. The purchase of HUD-owned properties is permitted as well, with certain restrictions attached.

FHA 203(k) loans are available in two types:

  1. The Standard 203(k) is intended for more complicated projects that involve structural changes such as room additions, exterior grading and landscaping, or renovation that would prohibit you from occupying the residence. A Standard 203(k) is also used if your project requires engineering or architectural drawings and inspections. Under this program a single family property may be converted into a two-, three- or four-unit dwelling or vice versa so long as the owner occupies one of the units.
  2. The Streamlined 203(k) is designed for less extensive improvements and for projects that will not exceed a total of $35,000 in renovation and related expenses. This version does not require the use of a consultant, architect, and engineer or as many inspections as the Standard 203(k). As a result, when applicable, the Streamlined 203(k) generally becomes the simpler, less costly option.

Once the homebuyer finds a property to purchase, the process of obtaining a loan insured under the provisions of the 203(k) program begins in earnest. The mortgage must be the first lien on the property being improved.

The maximum mortgage amount allowable under the 203(k) program is the lesser of:

  1. The as-is value or the purchase price of the property before rehabilitation, whichever is less, plus the estimated cost of rehabilitation, or
  2. 110 percent of the after-improved value of the property