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What is a 203k loan and how does it work?

By Bob Millaway, South Jersey Community Expert & REALTOR®

An FHA 203(k) loan is a renovation mortgage that lets you finance both the purchase of a home and the cost of renovations into a single loan. You can borrow based on the home's projected value after renovations, not its current condition. The loan covers purchase or refinance plus construction costs. Funds are released in draws as work progresses. It is ideal for fixer-uppers but requires an FHA-approved lender and contractor.

Why It Matters

A 203(k) loan lets you buy a fixer-upper and renovate it with one mortgage, avoiding the need for separate construction financing or high-interest personal loans.

Related Questions

What renovations add the most value? Should I hire a general contractor or manage the project myself? How do I find a trusted contractor for my renovation? How do I budget for a home renovation? Do I need permits for a remodel in New Jersey?

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