The Section 203(k) Rehabilitation Mortgage Insurance Program allows homebuyers or homeowners to purchase or refinance and rehabilitate a one- to four-unit single family property with a single mortgage loan. The total mortgage amount on the property, including the cost of the repairs, must fall within the FHA mortgage limit for the area.
A portion of the loan proceeds is set aside in an escrow account and released as rehabilitation is completed. The extent of the rehabilitation covered by Section 203(k) financing may range from relatively minor to near total reconstruction. Luxury items and improvements that do not become a permanent part of the property are not eligible uses of a 203(k) loan.
There are two types of 203(k) rehabilitation mortgages: Standard 203(k) and Limited 203(k).
The Standard 203(k) mortgage may be used for remodeling and repairs. There is a minimum repair cost of $5,000 and the use of a 203(k) Consultant is required.
The Limited 203(k) may only be used for minor remodeling and non-structural repairs. The Limited 203(k) does not require the use of a 203(k) Consultant. The total rehabilitation cost must not exceed $35,000, or $50,000 if the property is one of the first 15,000 mortgages secured by properties in Qualified Opportunity Zones (QOZ) during each calendar year. There is no minimum rehabilitation cost.
To apply for a 203(k) Rehabilitation Mortgage, please contact an FHA-approved lender. To find an FHA-approved lender in your area visit the following HUD website:
Contact the listed lenders to confirm their participation in specific HUD/FHA programs. You can also find lenders in your area using your local telephone directory under the heading “Mortgages”.
Find out more about the 203(k) program by visiting HUD's 203(k) Rehabilitation Mortgage Insurance web page at: https://www.hud.gov/program_offices/housing/sfh/203k/
For FHA Policy information see FHA’s Single Family Housing Policy Handbook 4000.1 II.A.8.a.i. at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
Information on the Limited 203(k) Program and QOZs is provided in Mortgagee Letter 2019-18 available at: https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee
As appropriate, FHA will provide advance notice via mortgagee letter suspending the increase to $50,000 prior to the 15,000 annual mortgage limit being reached in a given calendar year. Such notice will be available at: https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee