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Posted by Heather on September 26, 2018
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If you are thinking about buying a fixer-upper, you will soon find out that homes in poor condition do not qualify for traditional financing. Most home loans require the property to meet minimum standards.

For example, the lender may require that the house has a certified roof. This requires a licensed roofer to provide a written statement saying the roof was inspected and has at least three years of life left in it. Alternatively, the home could be in the perfect location but have some dated features. Essentially, the property you like may be perfectly lendable, but you want to make some key changes to the home. This can be tough when you don't have the money to buy the property and go through with all the upgrades you want.

Fortunately, there's a loan specifically designed for these types of purchases. The Federal Housing Authority (FHA) has a loan called the 203(k) home mortgage. The 203(k) home mortgage allows buyers to purchase fixer-uppers, which may need major repairs or minor cosmetic changes. If you're interested in buying a fixer-upper, then here's what you should know about the 203(k) mortgage.

A Closer Look at FHA Loans

The 203(k) home mortgage allows the buyers to finance an additional $35,000 to fix, upgrade, or improve the house or property. The buyer must qualify for an FHA loan. The FHA created home loans to encourage homeownership in the United States, so the mortgages are easier to qualify than others are.

In some ways,  the 203(k) home mortgage from FHA is easier to qualify for as you may be able to do so with a lower credit score than is usually accepted. And you may be able to come in with a down payment as low as 3.5% of the purchase price.

There are many types of structural repairs that can be completed with this extra money, including:

  • Room reconstruction
  • Plumbing
  • Well and septic repairs
  • Roofing, which can include gutters and downspouts
  • Replacing flooring
  • Repairing or removing health and safety issues

Cosmetic work can also be completed, including projects like:

  • New carpets/floors
  • Exterior and interior paint
  • Upgrading appliances and heat and air conditioning units to more energy efficient models
  • Upgrading to energy efficient windows
  • Landscaping and improvements

Another little-known area the 203(k) helps homebuyers pay for is making the house and property handicap accessible. Ramps can be installed, doorways widened, and bathrooms can be adapted to be wheelchair accessible.

The Bottom Line

As you can see from some of the available repairs, the property does not need to be a total fixer-upper to qualify for the loan. It may just need new carpet and some paint. The repairs and remodeling must exceed more than $5,000 to qualify for the 203(k), but it is a great way to open up homes to buyers that are traditionally out of their range.


If you want to find a fixer-upper and have it done for you or if you want to buy a move-in ready home, reach out to us at The Evangelisti Companies. Take a look at our current projects to learn more.

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