A large number of people choose to purchase a fixer-upper simply because it is cheaper. You can easily find a house in a good location but in need of repair. The price is lower, but you also need to spend money on renovations. If this is your scenario, the best choice is to apply for an FHA 203k loan. If this sounds confusing now, have no worries. This guide will tell you everything you need to know about FHA 203k loans and how to use them to purchase a home you have always wanted!

What is an FHA 203k loan?

Whether you are looking for a new place or a fixer-upper, Tampa is the best place for first-time homebuyers. In case you need to remodel your new home before moving in, you have two financing options:


  • get two loans, one for paying the mortgage and the other for renovations that come after;
  • get an FHA 203k loan that covers both expenses;


It is obvious that getting one loan is much better for your pocket than having to pay off two at the same time. The FHA 203k loan is a mortgage insured by the government that allows you to take out one loan for home purchase and remodel.

What is a limited 203k loan?

While a full 203k loan is used for major renovations, a limited 203k loan is only for homes that can be remodeled for up to $35,000. If you don’t think your new home will require significant repairs, it is best to contact a limited 203k loan consultant and create a plan of action. This is a better option because it’s easier to get a limited 203k than a full 203k loan.

How to know if you are eligible for a 203k?

Even though first-time homebuyers mostly use FHA 203k loans, they are also available for you even if you owned a home before. Your home purchase history is not a factor here.

The down payment should be at least 3.5%. The good thing is that you can get an FHA 203k loan even if you have a lower credit score. With the down payment of 3.5%, you need at least a 620 FICO score.

At the same time, your debt-to-income ratio should be 31/43. That means you can use 31% of your income for your home purchase and 43% for house renovation. However, this rule has some flexibility, so you can still get a loan even if these numbers do not align with your debt-to-income ratio.

The 203k loan steps from start to finish

If you decide to get in touch with your 203k loan consultant, it is crucial to understand how the program works. The usual steps are:


  • you apply for the 203k loan;
  • after you are approved, start searching for the contractors;
  • once you choose a contractor, ask for the estimate on the renovation cost;
  • once the agreement is made, you will close the loan;
  • after completing the repairs, you can move into your new home.

Understand the remodel options you have

If we look at the limited 203k, you can use this loan for minor changes. The most common ones include remodeling the bathroom or the kitchen, replacing appliances and your HVAC system, flooring, carpet, roof replacement, and painting walls. You can also repair any safety and health-related issues, or install energy-efficient improvements, and much more.

A full 203k allows you to do structural changes to your home, like adding or removing walls. You can convert a single-family dwelling into a multi-unit, do sewer and water alterations, larger landscaping projects, add accessibility features, or even move your house to a different location.

Even though it looks like you can do pretty much anything with a 203k, there are some exceptions. For example, you cannot use this loan to add luxury elements to your home, like a pool, tennis court, etc. Also, there is a time limit for the length of the renovation project, and it cannot last more than six months.

How to pick a contractor

Choosing your contractor comes with a list of requirements. You need to pick a licensed construction company, and it is best to select one with previous experience with 203k renovations. They also need to do the paperwork, so you cannot ask some buddies who do construction on the side. Furthermore, unless you are a professional contractor, you cannot do renovations yourself.

Everything needs to go smoothly when choosing a contractor. Any miscommunication may cause delays.

After you have decided on your contractor, you need to ask for bids on the renovations. You are not interested in estimates but in accurate pricing. You cannot start anything until you know the exact price.

Submit the paperwork to the lender

While you are finishing with the contractor, the lender deals with all of the income and credit reports. Once you submit the rest of the paperwork to the lender, you will sign the final mortgage documents after the loan is approved. That’s when the remodel can start.

Moving in

Once all the renovation is done and your Florida home is ready, the only thing left is the relocation. Moving into your new home does not have to be a complicated process, even if your relocation in Florida is a long-distance one – all you need to do is look for a professional moving company. This will be even easier if you use a 203k because you will save the money you would otherwise spend on the remodel.

Everything you need to know about FHA 203k loans – explained!

We sincerely hope that you now understand everything you need to know about FHA 203k loans. This short but efficient guide will help you prepare, get approved, and start with your renovations as soon as possible. Best of luck!

Meta description: Here is a useful guide on everything you need to know about FHA 203k loans. Get the house of your dreams and customize it to your liking!

Author bio: Mark Whitman is a real estate expert and a blogger focusing on home purchases and remodels. He aims to help first-time homebuyers by offering his expertise and guidance regarding the process.