Understanding 203K Loans

Understanding 203K LoansMany people really like the idea of buying a fixer-upper home that they can turn into their dream home. Unfortunately, this oftentimes results in a dashed dream when you realize you can’t afford the price of if a lender won’t give you a loan because the home is “uninhabitable.” Fortunately, this is when a 203k loan may be the perfect choice for you.

What a 203k Loan Is

The federal government is responsible for backing a 203k loan. They give these loans to buyers who are interested in buying damaged or older homes then repairing them. For instance, if you are interested in buying a home that’s in need of a new kitchen or bathroom the lender will give you the money to finance the home and they’ll also provide you with the money that you’ll need to do the necessary renovations to the home.

Oftentimes these loans also include:

  • A 20% “contingency reserve” so that you’ll have the money to do the work even if it costs more than the original estimate suggests.
  • A provision so that you have 6 months of mortgage payments. This will allow you to live somewhere else while the home is being remodeled and yet still be able to pay your new home’s mortgage.

What Properties Qualify

Some of the homes that qualify for this type of loan include:

  • Any home for up to four families that’s at least one year old
  • A home that’s been torn down but that has some of its existing foundation still in place
  • A home that you would like to have moved to a new location
  • While some condos are eligible, the condo can’t belong to a co-op
  • The home must meet FHA requirements (e.g. the value must not exceed a certain amount that depends upon where you live)

What Repairs Qualify

It’s important to understand that two types of 203k loans exist. These are:

  • The regular or standard loan which is for properties that need structural repairs, remodeling, a new garage, or some landscaping
  • The streamlined or limited loan that pays for improvements to energy conservation, roofing, appliances, and non-structural repairs (e.g. painting)

Depending upon which of these loans you get some of the things that are typically covered include:

  • HVAC systems
  • Decks and patios
  • Home additions (e.g. a second story)
  • Remodeling the kitchen or the bathroom
  • New siding
  • Flooring
  • Plumbing

Basically, anything that isn’t a “luxury” improvement (e.g. a tennis court or pool) will be covered as long as it’s a permanent part of the property.


When you decide that you want to take out a 203k loan to remodel a home that’s on the market, turning it into the home of your dreams requires help from a knowledgeable, professional, construction company. That’s where Hybrid Construction LLC can step up and help you as they’ve helped many others in the past. So once you decide to take this route to turn a home into your dream home, make sure you contact them right away so they can get started with helping you make this happen as soon as possible.

Picture Credit: Pixabay