Found a Fixer-Upper? Here’s What FHA 203(k) Will Actually Let You Repair

One of the first questions buyers ask about FHA 203(k) is:

“What can I actually fix with it?”

That is the right question because 203(k) is not just a bag of mortgage money you can spend on anything connected to the house.

At the same time, it can cover a much wider range of work than people realize.

Quick Answer

FHA 203(k) financing can potentially cover qualifying repairs and improvements involving roofing, HVAC, plumbing, electrical systems, kitchens, flooring, paint, accessibility improvements, wells, septic systems and more.

Standard 203(k) can also accommodate eligible major and structural rehabilitation that would not fit Limited 203(k).

Limited 203(k) currently allows up to $75,000 in total rehabilitation costs.

Roof Replacement

Roof work is probably one of the easiest examples to understand.

You find the right house.

The price works.

The location works.

Then the inspection says the roof is near the end of its life.

A qualifying roof replacement can potentially be included in 203(k) financing.

If roof condition is already making you nervous, read our guide to FHA appraisal roof requirements.

Heating and Cooling Systems

A failing furnace can be a serious expense.

So can central air.

Eligible heating and air-conditioning work can be included in an FHA rehabilitation plan.

This becomes especially relevant with older houses.

A $250,000 purchase can feel affordable until you realize the furnace, air conditioner and water heater are all near the end of their useful life.

Electrical Work

Older electrical systems can create both repair costs and FHA property-condition concerns.

Exposed wiring.

Unsafe components.

Outdated service.

Improper repairs.

A 203(k) can potentially finance eligible electrical rehabilitation.

Loan Under Review’s guide to FHA appraisals for older homes covers some of the property issues borrowers commonly run into.

Plumbing

Plumbing work can fit too.

Maybe there are leaks.

Maybe components need replacement.

Maybe the inspection discovers a bigger problem than the listing photos suggested.

Do not build your renovation plan before getting a serious look at the property.

Kitchen Renovations

Yes, kitchen work can potentially be included.

Cabinets.

Counters.

Flooring.

Electrical work.

Certain appliances and other eligible improvements.

But remember what the mortgage is for.

Do not assume every luxury feature you can find online belongs in an FHA rehabilitation mortgage.

Flooring and Paint

Limited 203(k) can be useful for a property that is fundamentally sound but seriously dated.

Imagine a house where the carpet is worn out, the walls need work, the roof needs replacement and the kitchen needs updating.

Together, they might easily add up to $50,000 or more.

That is where Limited 203(k) becomes worth discussing.

Wells and Septic Systems

Certain eligible well and septic work can be incorporated into 203(k) rehabilitation.

That can matter a lot in rural areas.

A failed septic system is not a cosmetic problem.

Neither is an unusable water supply.

Accessibility Improvements

Qualifying accessibility improvements can also be part of 203(k).

The exact project still has to satisfy program and lender requirements.

Do not assume every improvement automatically qualifies simply because it helps accessibility.

Exterior Improvements

Depending on the project, qualifying exterior work may include items such as decks, patios, porches, walkways, driveways or fencing.

This is not a free-for-all.

Get the lender involved before finalizing a major exterior project.

What About Structural Work?

This is where Standard 203(k) becomes important.

Major structural alterations and substantial rehabilitation are not what Limited 203(k) is designed for.

If you are dealing with foundations, structural walls or another major alteration, the project may require Standard.

Can 203(k) Fix FHA Appraisal Problems?

Potentially.

That is one reason the program exists.

A normal FHA loan may require certain repairs before the property can satisfy applicable property requirements.

A rehabilitation transaction can potentially incorporate approved work into the financing.

But an FHA appraisal still is not a full home inspection.

Read FHA appraisal vs. home inspection.

A Realistic Repair Package

Let’s say the house costs $245,000.

Roof: $14,000

HVAC: $10,000

Electrical: $7,000

Kitchen: $18,000

Flooring and paint: $9,000

Exterior repairs: $6,000

That gets you to $64,000.

If the work is otherwise eligible and non-structural, that may be the kind of package to discuss as Limited 203(k).

But your first estimate is not necessarily your final rehabilitation budget.

What Repairs Make a Normal FHA Loan Difficult?

Loan Under Review already has a guide to FHA minimum property standards.

That helps explain why some defects matter to FHA while others are mostly cosmetic.

A 203(k) can be a solution when required work and desired rehabilitation overlap.

Do Not Forget Your Total Payment

If you buy for $240,000 and finance $60,000 in work, your real decision is not based on a $240,000 house anymore.

Run your numbers.

Use the mortgage calculators and compare the renovated transaction with a move-in-ready house.

Sometimes the fixer-upper is a great value.

Sometimes it is just a cheaper house with $70,000 worth of problems.

The Bottom Line

FHA 203(k) can finance a broad range of qualifying repairs.

Roofing.

HVAC.

Electrical.

Plumbing.

Kitchens.

Flooring.

Paint.

Accessibility work.

Well and septic work.

Exterior rehabilitation.

And under Standard 203(k), eligible major structural work.

The better question is not simply, “Can FHA pay for this?”

Ask whether the entire rehabilitation plan fits FHA 203(k) and whether the overall mortgage still makes sense.

Frequently Asked Questions

Can FHA 203(k) pay for a roof?

Qualifying roof work can be included.

Can it pay for a kitchen remodel?

Eligible kitchen modernization can potentially be financed.

Can 203(k) pay for foundation repairs?

Certain major structural or foundation rehabilitation may fit Standard 203(k).

Can it pay for HVAC?

Eligible heating and air-conditioning work can potentially be financed.

Can I use it for cosmetic improvements?

Certain modernization and non-structural improvements can fit Limited 203(k).

Sources

• HUD — 203(k) Rehabilitation Mortgage Insurance Program
• FHA Single Family Housing Policy Handbook 4000.1
• HUD FHA INFO — 203(k) revisions

Educational information only. FHA requirements and lender policies can change. Loan Under Review is not a lender, contractor, appraiser or financial adviser.

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