what is an fha 203 k loan 
an fha 203 k loan is a type of government insured mortgage that allows the borrower to take out one loan for two purposes home purchase and home renovation an fha 203 k loan is wrapped around rehabilitation or repairs to a home that will become the mortgagor s primary residence an fha 203 k is effectively an fha construction loan understanding fha 203 k loansthe fha 203 k loan is meant to encourage families in low to moderate income brackets to purchase homes that are in dire need of repairs especially homes that are situated in old communities the program allows an individual to buy a home and renovate it under one fixed rate or adjustable rate mortgage the amount that is borrowed includes the purchase price of the home and the cost of renovation including materials and hired labor 1the loan may also cover temporary housing if needed which could be in the form of rent for the period that the house is under rehabilitation the dual purpose loan eliminates the need for a borrower to make two separate applications for a mortgage and a loan for home renovation either of which may not be approved by the bank or may come at a higher combined cost normally lenders are unwilling to offer a mortgage for a property in need of major repairs due to their safety and livability standards but fha 203 k loans which are backed by the government provide reassurance to lending institutions because the cost of renovating the home is included in the mortgage package the renovation fees are placed in an escrow account and disbursed as payment to the contractors as the work is completed 1 complete renovation of the home should not take more than six months as outlined by the fha guide for a 203 k loan 2types of 203 k loansthere are two types of 203 k loans limited 203 k and standard 203 k 3 the loans apply only to individuals and families who intend on making the property their primary residence this means that real estate investors and house flippers do not qualify the work carried out must be contracted to a licensed handyman if the mortgagor qualifies as one they may act as their own general contractor and do the repair work themselves using the money saved for cost overruns or additional improvements they cannot however be reimbursed for their labor 2a home that does not require much work would usually be paid for using a limited 203 k loan this option does not include structural work on the home such as adding new rooms or landscaping and the home must be habitable throughout the renovation period repairs under the limited 203 k are capped at 35 000 3the standard 203 k includes any extensive repairs and structural work that need to be done in the home with no capped repair cost the minimum amount that can be borrowed is 5 000 but the total value of the property must still fall within the fha mortgage limit for the area 1some of the repairs that an fha 203 k loan covers include plumbing flooring painting heat and air conditioning systems bathroom and kitchen remodeling improvement of health and safety standards landscape improvements implementing access tools for disabled persons the addition of energy conservation systems and window and door replacements 1 renovations that are considered extravagant or luxurious such as tennis courts gazebos and new swimming pools are not covered under an fha 203 k loan 2