Repairs are costly, especially if you’re turning a less-than-perfect living space into your long-term dream home. DIY-ers who love fixer uppers can apply for a 203k loan from the FHA (Federal Housing Administration).

Let’s say it’s costing more effort than you originally thought to make certain fixes to the house. A lender sees the home as “unlivable” or “uninhabitable”, which means you’re less likely to secure funding. Instead, a FHA 203k loan could be the answer.

The federal government offers these loans through the FHA who wanted to “turn around” damaged properties with more extensive renovations. The costs of renovating the space (labor and materials) are wrapped into the mortgage. You may consider borrowing additional funds if you need to stay in temporary housing while extensive repairs are made.

To qualify, you can choose between a more standard 203k, which is for structural repairs and remodeling, or the limited 203k, which is reserved for non-structural improvements. This means new roofing, painting, and appliances.

This special program covers:

  • Decks and patios
  • Bathrooms and kitchen
  • Carpet and flooring
  • Heating and cooling systems
  • Energy-efficient improvement
  • Health and safety issues
  • Plumbing
  • New additions
  • And more

Luxuries such as a new hot tub are not considered in this list of improvements because they aren’t permanent changes. Landscaping is also not included.

Choosing contractors to complete the jobs is a large part of the process. Even if you are a licensed contractor yourself, you can’t expect to get it all done on your own within the timeframe. Once you’re qualified, you must begin repairs within 30 days of the closing date. Projects must be completed within six months.

Not all properties qualify for this type of loan. If you’re an investor or plan on doing a “fix and flip”, this is not the type of financing for you. It’s ideal that you plan on living in the home on a long-term basis once repairs are completed.