What is a 203(k) Renovation Mortgage?

With a 203(k) loan, you can buy or refinance a home that needs work and roll the renovation costs into the mortgage. Because these loans are insured by the Federal Housing Administration, they may offer more lenient qualification requirements than other renovation loans.

FHA 203(k) financing can be an affordable way to pay for home improvements and may expand your home buying options, especially in high-cost areas.

Mortgage rates are somewhat higher for FHA 203k loans. Expect to receive a rate about 0.75 percent to 1.00 percent higher than for a standard FHA loan. Still, base FHA rates are some of the lowest on the market, so 203k rates are competitive.

You’ll pay standard FHA mortgage insurance, which is typically 1.75 percent of the full loan amount upfront (rolled into the loan) and 0.85 percent yearly (broken into 12 equal monthly payments).