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FHA 203k Loans

WHAT IS AN FHA 203k Loan?

Out of many different types of loans, the FHA 203k mortgage loan is one known for its distinct feature of rehabilitation. Therefore, it is also known as FHA 203k Rehab Loan. This loan help borrowers purchase a home that’s not in move in condition, one that needs to be renovated and repaired. This type of loan finances the borrowers to help purchase as well as renovate that property. Purchase and renovation costs are packaged into one single mortgage loan. Loan term can either be 15 years or 30 years.

BENEFITS OF 203k LOAN         

The major purpose of this particular type of loan is to help purchase or refinance, as well as renovate the home. Buying a property that needs renovation and needs to be taken care typically brings a lower sales price. In addition, one can purchase a home by renovating it to make it up to the FHA standard. Because two of the functions are combined as one, purchase and renovation combined into a single loan, the borrowers avoid multiple loans, hence, saving money. As FHA loans require lower down payments, FHA 203k also requires a down payment of 3.5%. Most of the borrowers find it better to have a 30-year term for ease of monthly payments.

TYPES OF FHA 203k                                                                        fha 203k loans in houston texas

There are three types of FHA 203k Rehabilitation Mortgage Insurance, depending upon the amount of renovation and repairs needed. These are Power Saver Pilot 203k Mortgage, Streamline 203k Mortgage and Standard 203k Mortgage loans, respectively.

  • FHA’s Pilot Power Saver 203k Program allows eligible borrowers access to low-cost financing when they include energy savings renovations and upgrades with their home improvement project. This is a pilot program and expires on May 4, 2015. It includes upgrades for energy efficient HVAC or appliances, including geothermal systems, etc.
  • Regular or Standard 203k loan is applicable in a scenario when structural improvements are needed like roof replacement, the addition of a room or other things related to structure. In this, mainly construction work is involved at a greater level. Rehabilitation cost can be at least $5000 to a virtual reconstruction The types of improvements that Section 203k financing allows include: structural alterations, elimination of health hazards, major site improvements, enhancing accessibility for a disabled person, etc.
  • Streamlined 203k is intended to facilitate uncomplicated rehabilitation or improvements to a home for which plans, consultants, engineers or architects are not required. It is applicable when the renovation costs are not going to be more than $35,000. Under this program, it can be used for repairs of roofs and gutters, replacement of existing HVAC systems, repair of electrical systems, flooring, weatherization, and others. Those considered ‘Luxury’ items are not allowed, like having a whirlpool or adding a tennis court.


There are certain requirements in order to qualify for an FHA 203k loan. The property must be FHA eligible and must meet the standard of FHA home loans. The borrower has to be able to document their income. Assets have to be documented as a source of funds to close. They also have to qualify based on their credit score. All other FHA rules will apply.

For existing properties, they must be at least one year old. The subject property must be a primary residence. Any questions or details about the FHA 203k Mortgage Loan program, our Home Loan Specialists can help and answer your questions.


by Gerry Nicodemus

Memorial - Mortgage Lending

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      AMCAP Mortgage Ltd. - West
      NMLS# 129122
      11931 Wickchester Lane #444
      Houston, TX 77043

      Tel: (832) 356-5605

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