In FHA, Loan Types

Like projects? Interested in a fixer-upper? A rehab home can be a great investment for the right buyer. We hear there is nothing like turning a diamond in the rough into your dream home. Just look at the popularity of home improvement reality TV shows today!

If you’re interested in buying a home that needs a bit of polish or even a major renovation, the FHA rehab program allows you to purchase the home and get additional money to make repairs and renovations.

Since the general rules of FHA still apply, it is easy to get approved because the lenders are protected. However, there is still an added layer of risk with the cash given to make repairs. Due to this factor, the minimum credit score is slightly higher at 620. Interest rates are still competitive.

Who is this loan for?

So you’ve gone shopping. You’ve found the perfect home—it’s the right size for your family, terrific floor plan, in a great location. Yet with all that potential, there are significant improvements that must be made before the home is livable or sold.

FHA can fund those improvements and help you purchase a home other lenders won’t touch. There are benefits—not only do you get your home (often at a steal!), but it moves a stagnant listing off the market and adds value to the community. The resale value can go up significantly post-improvement, making this a great investment too.

The right borrower is patient and also realistic in their expectations.

Luxury items are not allowed, and there are certain rules for exactly what type of improvements are allowed. There will be dramatic improvements, but don’t let your dreams run wild.

There is also a lot more paperwork for this type of loan. This will increase the processing time until approval.

You may need to find temporary housing or alternate living arrangements while waiting for construction to be completed, depending on the work done.


  • Projected work must be completed within six months.
  • Investors cannot use the program.
  • You must borrow at least $5000 in addition to the purchase loan.
  • You can borrow up to 110% of the home’s projected value after improvement, as long as it is approved by an appraiser.
  • Work must be completed by a licensed contractor who is experienced with the 203k program.

203(k) loans can be challenging for even the most experienced loan officer, but we can tell you in 5 minutes whether your home can be a reality. If you’ve found a home that needs a makeover and you are on board with all the above, please fill out our contact form!

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