The FHA 203(k) loan is an beneficial loan program that helps loan seekers finance and repair properties. It is one of the only government-backed mortgage programs that allows a borrower to purchase and repair a home on the same loan. This loan program is an ideal way to help low-income households finance and improve their primary residence, while building equity in their property.

With the FHA 203(k) loan, a borrower can purchase a property and include the cost of repairs in their loan. The loan proceeds can be used to purchase, build, remodel or renovate an existing one- to four-unit property, an eligible condominium or townhome. These funds can be used for structural repairs, energy efficient upgrades, for siding, windows, plumbing, electrical work, HVAC systems and more.

The FHA provides two types of 203(k) loan programs: full 203(k) and streamlined 203(k). The full 203(k) loan program is the most popular of the two, but both allow for borrowers to finance the purchase of a home and repairs in the same loan.

The full 203(k) loan program will cover both major and minor repairs or upgrades, subject to the loan limit of the lender. The streamlined 203(k) permits the borrower to repair or upgrade only portions of the home, such as the kitchen, laundry room, or bedrooms.

In order to apply for a 203(k) loan, borrowers must meet specific credit qualifications, debt-to-income ratio, and other requirements. Borrowers must have a minimum credit score of 620 and work with an approved FHA lender in order to receive an FHA 203(k) loan.

The FHA 203(k) loan is a great way for lower-income households to improve their current primary residence, and build equity into the property. Ultimately, this loan program is a win-win situation for both the lender and the borrower.