---
title: What is an FHA 203(k) Rehab Loan?
description: An FHA 203(k) loan is a mortgage loan that also covers the cost of repairs. It's perfect for the purchase of a fixer-upper.
---

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# [What is an FHA 203(k) Rehab Loan?](https://www.contourmortgage.com/news/what-is-a-203k-loan)

 Written by [Contour Mortgage](https://www.contourmortgage.com/news/author/contour-mortgage) | Dec 18, 2015 7:55:00 PM

In the right circumstances, an FHA 203(k) rehab loan could mean the difference between buying a move-in condition house in a less than stellar neighborhood or a fixer-upper in a coveted area. If you’re handy (or your brother-in-law is a contractor), the decision to apply for this financing option just might be a no-brainer.

In short, an FHA 203(k) loan is granted to buyers looking to purchase and renovate a home.

 

**What types of FHA 203k rehab loans are there?**

There are two kinds of 203(k) mortgage loans:

1. Regular 
     - Structural repairs (i.e. Fixing cracks in the foundation, adding dormers, addressing termite damage, and relocating a load-bearing wall)
     - Funds up to $625,500 (purchase price and renovations combined)
2. Streamline 
     - Non-structural repairs (i.e. painting, replacing siding and/or flooring, updating the kitchen, and installing new appliances)
     - Funds anything less than $35,000

**What does an FHA 203(k) rehab loan cover?**

The 203(k) loan will cover the cost of the home purchase (or a [mortgage refinance](https://www.contourmortgage.com/refinancing)) plus the cost of repairs, up to 20% in contingency reserve in case the repairs end up costing more than the original estimate and a provision to cover the cost of living elsewhere during repairs in the form of mortgage payments lasting up to six months.

The loan will amount to either 110% of the estimated value of the property after all of the repairs are completed or the as-is value plus the cost of repairs—whichever is less.

 

**Does the property type matter?**

Yes. A 203(k) loan can only apply to certain types of real estate. These include:

- Any home up to a 4-family that has been completed for at least one year
- A house that you want to relocate to a new address
- A home that has been demolished as long as the foundation is still intact and in place

Some condos, yay. All co-ops, nay.

 

**How do I apply for a FHA 203(k) rehab loan?**

This is a government loan, so you will have to comply with FHA requirements.

Such requirements include:

- Having the ability to make at least a 3.5% down payment
- Possessing good credit score (the actual number can vary depending on the lender you’re working with and the percentage you put towards your down payment)
- Out of bankruptcy at least two years
- Out of foreclosure at least three years
- Purchasing what will be your main residence

Most importantly, always remember to find a mortgage lending company who is experienced and comfortable with [FHA programs and their limits](https://www.contourmortgage.com/blog/understanding-fha-loan-limits). This will make the entire experience easier.

 

[View full post](https://www.contourmortgage.com/news/what-is-a-203k-loan)

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