Every once in a while, a Government-backed program designed to help millions of average Americans goes unnoticed and under-utilized, largely because of a lack of public information servicing, as well as misunderstanding and misconceptions about the program. The FHA 203k Rehabilitation Loan is just such an unknown gem.

What is an FHA 203k Mortgage Loan?

The FHA 203k Loan is designed to provide cash to repair, renovate, or remodel an owner-occupied residential home. It can also be used for multi-unit residential rental properties of three or less units, as long as one of the units is owner-occupied. The home’s value must come in under or at the FHA Loan limits established for the County that the home is located in, and must also conform to minimum HUD standards.

The loan’s amount is based on the mortgage amount plus the amount of added appraised valued to the property that will be realized once the renovation or remodeling projects have been completed, thereby providing much needed cash to complete the construction projects.

The loans aren’t offered by all Mortgage Lenders, and each Lender has established the guidelines under which they will offer the loan.

What Can the FHA 203k Mortgage Loan be Used For?

The FHA 203k Rehabilitation Loan can be used for a wide range of residential property improvements including bringing the home up to the latest trends and styles in kitchens and bath design, completing exterior or interior repairs, replacing old appliances with new Energy Star appliances and HVAC systems, undergoing complete renovations and additions, replacing flooring, and even landscaping. There are a small number of “luxury item” exclusions, such as hot tubs and swimming pools (although some maintenance and repairs are covered).

There are two versions of the loan; a “Streamlined” loan which can provide up to $35,000 of cash to make “non-structural” repairs and improvements, and the “Full” loan which covers a broader range products and services and can provide cash of up to 35% of the property’s appraised value (including the value of the improvements being made). Your Mortgage Lender can help you decide which loan is best for your particular situation.

 Why the 203k is a Loan for Our Time (A Rare Source of Renovation Financing)

The FHA 203k loan helps solve a major problem facing the current residential real estate market; how to accelerate the sale (and removal) of these distressed properties from the sales inventory.

A large percentage of the current existing home sales market comprised of “Distressed Properties”. These include not only homes that have been foreclosed on and are now bank owned, but also homes that are being marketed under a “short sale” agreement with the financial institution that holds the note on the home.

Many of these homes suffer deterioration due to being un-occupied, as well as having regular maintenance that was never performed on  the home. There are also instances these types of properties that have become victim to vandalism.

Even if these homes have been reasonably maintained, they generally fall outside of the current kitchen and bath design trends and styles. This makes them an extremely attractive bargain, because these types of projects add the most “bang for the buck” and greatly increase the likelihood that the remodeling projects will add substantially to the appraised value of the property after taking into account the improvements.

The FHA 203 loan is a fantastic option for financing remodeling and repair projects at a time when limited solutions exist in the market place that provide cash for these purposes. What’s more The FHA 203k loan can not only be used to purchase a home and finance improvements, but can be used to re-finance an existing home and provide cash to do all of the same types of constructions projects.

Why Waiting to Renovate Often Translates into Never Renovating

The vast majority of remodeling and repair projects fail to be funded to completion or ever undertaken  at all. It is very difficult for the average homeowner to finance large projects with cash reserves, primarily because of the many competing priorities on the family’s finances and cash.

Consequently, those projects that can add many years of enjoyment and utility to one’s home never materialize. What’s more, ongoing maintenance and repairs often get deferred, resulting in larger and more expensive repair projects that occur due to added years of destructive weather and pest damage.

The absolute best time to  renovate your home is at the beginning of your ownership. This is the time when you are taking the home that you purchased and molding it into your lifestyle and furnishings. Create your perfect paradise by integrating remodel projects into your other move-in projects, and then sit back and enjoy the home paradise that you’ve custom-tailored to meet your standards and desires.


Jeff Wiblitzhouser is the President of Paradise Found Construction in Cary, N.C., a builder of high-performance and innovative green certified homes and remodels. He is a two-time recipient of the National Association of Home Builders Green Certified Remodel Project of the Year Award. He is active in the leadership of the Home Builders Associations, and an advocate for the national importance of building and renovating homes to highest level of performance relative to the return on investment. He focuses on implementing technologies and building science that return a 5-7 year or less payback.