FHA 203(k) Renovation Loan

Buy a home and fund the repairs in one loan

The FHA 203(k) renovation loan solves a problem that trips up a lot of buyers: the house you can afford needs work, but you do not have cash on hand to fix it after closing — and a standard mortgage will not fund repairs. The 203(k) rolls the purchase price (or the payoff of an existing mortgage in a refinance) and the cost of renovation into a single FHA-insured loan with one monthly payment. Critically, the loan is based on the as-completed value of the home — what it will be worth once the improvements are done — not just its current condition.

That structure makes the 203(k) a practical tool in Arizona and Texas markets where move-in-ready inventory is competitive and dated homes sit longer. A buyer can purchase a home that would fail a standard FHA appraisal in its current state, then use the same loan to bring it up to standard and make it their own.

Two versions: Limited and Standard

There are two flavors of the 203(k), and choosing the right one depends on the scope of work. The Limited 203(k) (sometimes called the Streamline 203(k)) is designed for smaller, non-structural projects — new flooring, paint, appliances, a kitchen or bath refresh, roofing, HVAC replacement, and similar cosmetic and system repairs. It caps the total renovation budget at roughly $75,000 and does not allow structural changes, which keeps the paperwork lighter and the timeline shorter.

The Standard 203(k) is built for larger and structural projects: moving walls, room additions, major foundation or structural repair, or work that makes the home temporarily uninhabitable. Because these projects are more complex, the Standard version requires a HUD consultant to prepare a work write-up, oversee the scope, and sign off on the draws that release funds to contractors as milestones are completed. There is no fixed dollar cap on the Standard version beyond your county’s FHA loan limit.

Down payment and how the numbers work

The 203(k) keeps FHA’s familiar qualifying terms. The minimum down payment is 3.5% for borrowers with a 580 or higher credit score, and 500–579 requires 10% down. The difference from a standard purchase is what the down payment is calculated on: with a 203(k), the down payment is based on the total of the acquisition cost plus the rehabilitation budget, not just the purchase price. Your combined loan still has to fit within the county FHA loan limit — in 2026 that is the $541,287 floor in most Arizona and Texas counties, up to $557,750 in metro Phoenix, $563,500 in Dallas–Fort Worth, and $571,550 in the Austin area.

As with any FHA loan, the 203(k) carries the 1.75% upfront mortgage insurance premium and the annual premium billed monthly. Renovation funds are held and disbursed to licensed contractors as the work progresses, so it is not a do-it-yourself cash-out; the money is tied to an approved scope of work and inspections.

Who should consider a 203(k)

The renovation loan is a fit for buyers who have found a home in the right location or at the right price but need to invest in repairs or updates to make it livable and lasting. It is also useful for current FHA homeowners who want to refinance and renovate at the same time. If the home you are buying is already in good condition, the simpler FHA 203(b) standard purchase loan is usually the better choice.

• Finances the home and the renovation in one loan, based on the as-completed value of the property
• Limited 203(k) covers non-structural repairs and cosmetic updates; Standard 203(k) covers larger structural projects and requires a HUD consultant
• Same 3.5% minimum down payment with a 580 credit score as the standard FHA program; 500–579 requires 10% down
• Useful for homes that would not pass a standard FHA appraisal in their current condition
• Down payment is calculated on the total acquisition plus rehabilitation cost