What Is a 203k Mortgage?

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  • Written By: Geri Terzo
  • Edited By: A. Joseph
  • Last Modified Date: 13 September 2019
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A 203k mortgage is a loan offered in the United States and provided by a low-income housing authority, including a division of the U.S. Department of Housing and Urban Development (HUD) called the Federal Housing Administration (FHA). There are different types of 203k mortgages, including one that provides for a refinancing of a mortgage up to a certain amount and one that covers repairs in single-family homes. Certain guidelines and eligibility requirements must be met to qualify for these home loans. Ultimately, these loans are created to support neighborhood development and the rehabilitation of communities.

Sometimes it's impossible to qualify for a traditional mortgage offered by a financing company in order to make dreams come true and become a homeowner. There are programs that allow for low down payments versus traditional programs. One of these loans is a 203k mortgage.

An FHA 203k mortgage is insured by the provider, the FHA. The home buyer is directed to use the funds to buy a home that will be used as a primary living space. In some instances, the loan can be used toward limited business functions, such as toward a storefront, offices or even storage.


Borrowers must meet certain criteria to obtain a 203k mortgage. For instance, if the borrower works only part time, there must be proof of employment at the same job for at least two years in order to meet FHA standards. Similarly, a self-employed individual must have proof of tax returns for two years.

The borrower can use the funds from the 203k mortgage toward a traditional, one-family home, but there are other alternatives. A 203k mortgage also will qualify for one- to four-unit primary residences, three -to four-unit properties, certain double-wide and single-wide trailers and certain rural properties that do not exceed 10 acres in land.

There also are options available for existing homeowners, including a streamlined 203k offering designed by HUD. HUD offers a certain amount of money to refinance a loan into an existing mortgage for the purpose of upgrading a property before its owners settle in. This money could go toward repairs, reconstruction and other improvements approved by a home inspector.

HUD also has an FHA 203k mortgage program for single-family housing. The loans are distributed by lending institutions approved by the FHA. For a prospective homeowner to qualify, the property must be approved, and the borrower's credit must be approved.


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