Skip to content
Fact Checked by Experts

FHA 203k Loan in Lee County, Florida

Homebuyers who purchase a natural fixer-upper face various projects requiring time, dedication, and money. Usually, homebuyers have to make a few repairs to their home after making a purchase, and the extra costs can sometimes be overwhelming. If you are in this situation, you could consider applying for an FHA 203K loan.

What is an FHA 203K loan?

FHA 203K loan, also known as Section 203(K), or a mortgage rehab loan, combine remodeling and home purchase costs into a single loan. The loan is backed by the Federal Housing Administration and finances homebuyers with enough money to buy their home, make necessary repairs, and cover the cost of materials and labor.

FHA 203(K) loans don't lend the funds. Instead, they provide financial cover for lenders that provide funding to the borrowers. Some FHA 203(K) loans include six months of funding for mortgage payments.

Keep reading to find out how FHA 203K loan work and if you are eligible to apply for funding.

How does the FHA 203K loan work?

You can get a 203(K)-renovation loan on a 15 to 30-year adjustable or fixed-rate mortgage. The amount of money you can borrow depends on various factors, including your credit score, income, etc. the amount of money you have to place as your down payment depends on your credit score.

For instance, your lender may ask you to place a 3.5% down payment if you have a good credit score or 10% if your credit score is less than 580. Additionally, the amount you borrow depends on your home's location and has to meet the FHA's set maximum for that region.

Generally, the amount of cash you can borrow depends on:

  • Calculations combining your home's previous value and cost of renovations.

  • FHA's maximum loan limit for properties located in your home's region.

  • Calculations involving your home's after value plus the improvements.

Homeowners can do some or all renovations themselves with the lender's approval. However, most cases often require licensed contractors to renovate the home. These loans are perfect for old homes that need renovations. They aren't that good for tiny homes that don't require $5000 (minimum) in renovations.

You should consider various forms of financing if you plan on doing some minor repairs. FHA 203(K) loans are best suited for more significant projects designed to improve neglected homes and make them more habitable. FHA 203(K) loans provide great refinance rates and are best suited for cash-strapped owners that don't or can't tap their home equity.

Types of FHA 203(K) loans

There are two types of FHA 203(K) loans: standard 203(K) and limited 203(K). Standard FHA 203(K) loans are good for bigger rehabilitation projects requiring more funding. Limited loans restrict the cost and scope of improvements you can make.

Standard FHA 203(K) loans

Standard FHA 203(K) loans are meant for individuals planning to do extensive structural work and repairs with zero capped repair costs. The minimum amount individuals can borrow is $5000; however, your property's total value must still fall within FHA mortgage limits for the area.

You can use standard FHA 203(K) loans to:

  • Update your home's interior
  • Installing a septic tank and (or) a well
  • Upgrading mechanical systems
  • Rebuilding parts of your home
  • Building a new garage
  • Building an addition

Lenders require individuals applying for standard FHA 203(K) loans to place a 3.5 % down payment at 96.5 % LTV. The loan is meant for individuals planning to use the home as their primary residence. Individuals can make five draws; however, advances and material draws aren't allowed.

Lenders require proof of permits before or on the first draw and 10% holdbacks on all draws besides the first draw. Additionally, applicants must begin work within the first 30 days and not stop for a period longer than 30 days. Additionally, you should complete the project within 6 months.

Limited FHA 203(K) loans

Lenders provide limited FHA 203(K) loans for individuals buying homes that don't need much work. However, the option doesn't include structural; work done on the home.

For instance, you won't be covered for landscaping or adding new rooms to the home. Additionally, your home should be habitable throughout the entire period.

The loans provided under limited 203(K) are capped at $35000. You can use limited 203K to:

  • Repair the roof
  • Update your bathroom or kitchen
  • Add a new floor
  • Upgrade your HVAC system
  • Make energy-efficient upgrades
  • Purchase new appliances

Your down payment and LTV (Loan-to-value) ratio should be 3.5% for 96.5% LTV, and eligible properties are 1–4-unit properties, townhomes that require internal repairs only, and condominiums with internal repairs only. The residence should be the buyer's primary residence, and you could get 50 % of the repair cost if you apply via writing before the closure.

Eligible applicants can get one initial and final draw for each contractor; however, material draws aren't allowed. You should also provide proof of permit within 30 days of closing.

There aren't any drawbacks to closing, and you could get contingency funds for unforeseen repairs. However, your renovations should begin within 30 days of the loan's closing, not seize for 30 consecutive days, and be completed within 6 months.


Homestyle loans allow eligible applicants to purchase homes and do renovations simultaneously. The main difference is that homestyle loans are conventional mortgages with pros and cons. While FHA 203K loan requires a higher credit score and lower down payment, homestyle loans are more stringent.

Homestyle loans are more flexible in what you can do with the loan. For instance, applicants wanting homestyle loans should have a credit score of more than 620 with a debt-to-income ratio (DTI) lower than 45%. (it's achieved by dividing your monthly debts and your income).

You could use the loan for second homes or investment properties. FHA 203(K) loans require lower down payments than homestyle loans. However, homestyle loans require between 5 and 25 % down payments. However, you should place a down payment of more than 20 % if you want to avoid mortgage insurance.

Things you can renovate with homestyle loans include:

  • Putting in new flooring
  • Updating site amenities and landscaping
  • Repairing spa and (or) pool
  • Adding square footage to your home
  • Renovating your bathrooms and kitchen

You could get this loan at 3% with a 97% LTV; however, one homebuyer should be a first-time borrower. You could also get a 1-unit primary resident for 4% with a 95% LTV and a one-unit second home for 10% with a 90% LTV. You could also get a 1-unit investment for a 15% down payment with an 85% LTV.

You'll require mortgage insurance for LTVs that exceed 80%. You could get the loan if you use your home as a primary, secondary, or investment property. Eligible properties include condominium properties, townhomes requiring internal repairs, and 1–4-unit properties.

You'll have up to 5 draws; however, advances aren't allowed, but you could get up to 50% of the total material's budget. This will be on a case-by-case basis based on need. Also, you'll have to provide proof of permit on or before your first draw, and a 10% holdback will be paid out with the final draw.

Additionally, you'll get contingency funds for any unforeseen repairs; however, the funds will be applied on a principal reduction once or when you complete all items on your bill. Also, you should start your renovations within 30 days of closing, not stop for more than 30 consecutive days, and complete them within 6 months.

Construction miniature workers team working on house renovation

FHA 203K loan qualifications

Lenders looking to apply for FHA 203K loan should understand the various qualifications they should achieve before applying for a loan. For instance, you should make a minimum down payment of 3.5 % and have a credit score of 580 or more. You should place a 10 % down payment if you have a credit score between 500 and 579, and there should be at least a three-year period before any foreclosures.

You'll also pay upfront annual mortgage insurance premiums between 0.45 % and 1.05 % of your loan's total amount. Additionally, you'll have to apply with an FHA-approved lender and keep the loan within the amount approved by the FHA within your area. The limit for most 1-unit properties is $420680.

Your lender will require you to have 20 % of the total costs to cover any unexpected costs that may come up along the way. Your lender may require you to provide proof of out-of-pocket cash to pay for the unexpected costs if you don't have enough equity to roll them into your loan.

One other thing is that FHA 203(K) loans allow you to apply for a loan based on the home's after-improved value. Your FHA appraiser will inspect your home and determine how much the home will be worth after you complete your renovations. Other loans consider your home's as-is value, which may be less than you need.

FHA 203(K) loans - Don't Move

The FHA will insure your loan and provide financing to renovate and improve your home. You could refinance your loan and pay for renovations or improvements as part of the monthly mortgage payment. You could do this regardless of your current loan, and you'll get longer terms with lower mortgage rates.

This option allows you to make monthly mortgage insurance payments and an upfront mortgage insurance payment. You'll also have to get an FHA appraisal and complete your renovation within 6 months. However, there are rules regarding your refinance, but they aren't too restrictive.

Think about this - you may have a lovely home to live in; however, there is the chance that the home isn't what you currently dream of. You may want to make it better; however, there is the chance that you may be experiencing financial issues at the moment.

The best step you could take is applying for a refinancing solution that enables you to renovate your home and make it more habitable.

Securing a mortgage for your home isn't easy; however, you could always try FHA refinancing loans. You could use this loan to renovate your home to fit your needs and style. There are many advantages to these types of loans, including the option to refinance your home, create equity, and make upgrades or repairs.

Additionally, the loan is perfect for individuals that want to refinance or buy homes with a low credit score. You won't have to make a high down payment or pay high-interest rates for the loan. Additionally, the loan will be insured and government-backed allowing lenders to disburse them more readily since they are protected.

There are a few limitations to the loan's applications, including costs of rehabilitation as dictated by the lenders and program; however, you could do some significant rehabilitation projects to your home.

You could modernize your home and refinance your existing mortgage without a sweat. Doing this helps you breathe new life into your home and get your home dream effortlessly.

A few things you could add to your home include:

  • Adding a new bathroom
  • Adding a pool to create your backyard oasis
  • Adding square footage to your home to create more space for your family
  • Upgrading your home's cosmetic touches to your home to make it more aesthetically pleasing.
  • Eliminating safety and health hazards.
  • Structural reconstruction and alterations
  • Improving and modernizing your home function
  • Site and landscape improvements
  • Energy conservation improvements
  • Adding and replacing gutters, roofing, and downspouts

Additionally, HUD requirements dictate that such structures refinanced under the FHA 203K loan program meet basic structural and energy efficiency standards. Thus, it would help to understand your limitations and legal requirements before applying for the loan. However, it is a great way to make your house more homely, and you shouldn't pass the chance.

How does the loan create value for your home?

Homeowners (or any other buyer) want to know whether their investment provides value. Here are some points you should consider as a guide for the entire process. For instance, you should choose homes situated in your perfect neighborhood. As such, paying for your home is an investment since you'll be happy staying there for days.

Additionally, fixing your home through this strategy ensures all renovations are done within time. Your contractor will want to finish the loan on time since they want to get the 50% they are owed if they finish their project on time. This presents a win-win situation where you get your renovation done, and the contractor gets paid.

Lastly, using this strategy earns you equity without breaking a sweat. For instance, you could buy a home without a garage at a low price. You can then use a small investment to make the home better. Add a garage and increase the home's value significantly; this will have earned your equity in your home without the hustle of waiting or making huge payments.

Top 5 desserts in Lee County, Florida

  • Smallcakes - Lemon cake has made a name for itself in various food networks like The view on ABCs and Cupcake wars. Visit small cakes and enjoy the perfect amount of icing and hospitality. There are lots of flavors like birthday cake, lemon drop, and pink vanilla.

  • Heavenly biscuit - Visit heavenly biscuits and experience home-cooked breakfasts, including biscuits and incredible sweets. The spot is known for its cinnamon rolls, pecan rolls, and bread pudding. Stop at the spot and get to enjoy the best treats ever.

  • Norman love confections - This is the best place to stop if you are a chocoholic. The spot has the best milk chocolate, dark chocolate, white chocolate, and the tastiest gourmet truffles. You should also visit next door and enjoy some artisan gelato by Norman love!

  • Gulf Coast Fudge Co. - Get some old-fashioned gulf coast fudge cooked in a copper kettle from the finest ingredients and a recipe that goes back to the 1800s. The fudge is hard-pored and colled on a marble slab, whipped into a loaf. There are over 40 flavors and hand-rolled soft pretzels, among others.

  • Bennett's Fresh roast - This spot is a must-visit and has famous fresh donuts with over 20 different varieties, including orange coconut, s'mores, peanut butter, etc. visit this location, and your Florida vacation is officially complete.


Lee County, Florida, is the perfect location for people that want to get away from the city and raise a family. FHA 203K loan is a perfect addition that could help you select and renovate your dream home.

As such, you should take your time, research your eligibility, and make your application to get the chance to live in your dream home. Have fun!

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

Find The Right Mortgage

For more than 20 years, Phil have been helping customers achieve their home purchase and refinance goals by providing them with invaluable resources and support.

Schedule a FREE Consultation
Phil Ganz

Subscribe to Get Your First Time Homebuyer Checklist

Sign up for the weekly newsletter to stay up to date on the latest real estate market trends, loan news, and so much more!