FHA loans · HUD Handbook 4000.1FHA 203(k) renovation loans: Limited vs Standard

FHA's 203(k) program finances buying (or refinancing) and rehabilitating an existing one- to four-unit home – or the interior of an eligible condo unit – in one insured mortgage. The home must have been completed at least a year before the FHA case number is assigned, and a property that fails FHA's standards for health, safety or security can qualify if the work corrects the problem. There are two types. The Limited 203(k) is for minor remodeling and nonstructural repairs with total rehabilitation costs up to $75,000 (reviewed annually); it does not require a 203(k) consultant, and work counts as 'major' – and ineligible – if it will take more than nine months, needs more than four draws per contractor, or requires a consultant's work write-up, as do structural changes, room additions, landscaping and luxury items. The Standard 203(k) requires at least $5,000 of eligible improvements and an FHA-approved 203(k) consultant; it can cover structural repairs, additions, finished basements or attics, garages, converting to two to four units or adding an ADU, and eliminating health and safety hazards, but not luxury items such as a new pool, outdoor hot tub, sauna or barbecue pit. A Standard 203(k) can finance a mortgage payment reserve of up to 12 months while the home cannot be occupied. Eligible properties include condo units, site condos, manufactured homes (non-structural work), mixed-use buildings at least 51% residential, and HUD-owned homes marked eligible for 203(k).