A standard mortgage covers the purchase price of a home. It doesn't cover what it costs to fix it up. That gap is why renovation loans exist. In Florida, the FHA 203k is one of the most commonly used, because it bundles the purchase price and the renovation cost into a single loan at closing.
What an FHA 203k Loan Is
The 203k is an FHA loan that includes renovation costs in the total loan amount. Instead of buying the home with one loan and funding repairs separately, everything happens together. One loan, one closing, one monthly payment.
There are two versions. The Limited 203k is capped at $35,000 in repairs and covers cosmetic improvements. The Standard 203k has no cap on renovation costs and allows for structural work, major system replacements, and additions. The same FHA loan limits that apply in Florida counties apply to the total amount of the 203k, including the renovation budget.
What You Can Finance
The Limited 203k covers paint, flooring, windows, appliances, kitchen and bathroom updates, and minor repairs. No structural changes.
The Standard 203k covers structural repairs, roof replacement, HVAC systems, foundation work, plumbing, electrical, and full renovations. It can also include a contingency reserve of 10% to 20% of the renovation budget to cover unexpected cost increases.
Neither version allows for luxury additions. A pool, an outdoor kitchen, or a home theater won't qualify under either program. If those are on your list, the conventional alternative below is worth looking at.
The Conventional Alternative: HomeStyle Loan
Fannie Mae's HomeStyle renovation loan works similarly but follows conventional underwriting. It requires a higher credit score than FHA and doesn't carry FHA's upfront mortgage insurance premium. It also allows for luxury renovations the 203k doesn't permit.
If your credit is strong and the renovation you're planning goes beyond FHA's eligible scope, HomeStyle is worth looking at alongside the 203k. The comparison between FHA and conventional on the base loan side applies here too: down payment, MIP, and credit requirements all shift.
How the Process Works
You get pre-approved for the renovation loan first. Then you find the property, get contractor bids, and the lender approves both the purchase price and the renovation plan. Funds for the renovation are held in escrow and released in draws as work is completed.
Standard 203k requires a HUD-approved consultant to oversee the project. Limited 203k does not. Either way, plan for 45 to 60 days to close versus the 30 days typical for a standard purchase. The extra steps add time.
At 14 Days To Close, we handle FHA 203k and HomeStyle renovation loans in Florida. If you've got a property in mind and want to know if the numbers work, let's run them. We'll tell you which program fits the scope and what the down payment looks like.
