An FHA 203(k) loan lets a buyer finance the purchase of a home and the cost of repairing it in one mortgage. Instead of borrowing for the house, then separately finding money for the roof or kitchen, you roll both into a single loan. For buyers who love a neighborhood but cannot find a perfect house, that can open up homes that other buyers walk past.

How a 203(k) generally works

• You find a home that needs work and make an offer, like any other purchase.
• An FHA-approved lender underwrites the loan based on the purchase price plus the planned repairs.
• A licensed contractor provides a bid for the work, and larger projects usually need a consultant to review the plan.
• The repair money is held in escrow and released in stages as the work is completed and inspected.
• After the work is done, you live in the house with a single mortgage payment.

Limited and standard versions

The 203(k) comes in two general forms. The limited version is meant for smaller repairs that are not structural. The standard version is built for larger projects, including structural work, and it carries more paperwork, more oversight and a longer timeline. Dollar limits and rules are set by HUD and your lender, and they change, so ask an approved lender for the current requirements instead of relying on a number you read online.

Who it can work well for

• First-time buyers who want a home they can improve over time
• Move-up buyers who would rather renovate than pay a premium for a finished house
• Buyers who plan to live in the home. The 203(k) is for owner-occupied purchases, not rental properties.

What to know before you start

• Not every seller or listing agent likes the extra steps, so your offer needs to be strong in other ways.
• The process takes longer than a standard FHA purchase, so plan the closing date with that in mind.
• Contractors must be willing to work within the loan rules and be paid in draws.
• You still need to qualify. Credit, income and the property itself all matter.

Other renovation loans

FHA is not the only option. Conventional renovation loans, such as Fannie Mae HomeStyle and Freddie Mac CHOICERenovation, can fit buyers who have stronger credit or who want different terms. Which one is best depends on your credit, down payment and the scope of the work. Talk to Nil about approved lenders.

Where we fit in

We are not lenders, and we do not make loan decisions. What we do is walk the house with you, estimate the repairs and the after-repair value, introduce you to contractors from our network, and help you write an offer that a seller will accept even with a renovation loan attached. We work with buyers in Atlanta, Brookhaven, Decatur, Duluth, Ellenwood, Griffin, Hampton, Lawrenceville, Lilburn, Locust Grove, McDonough, Norcross, Snellville, Stockbridge, Stone Mountain and Tucker.

Nil Patel is a licensed Georgia real estate salesperson with Keller Williams Realty Atlanta Partners. This page is general information, not legal, tax or financial advice, and nothing here is a commitment to lend. Talk to a lender and a real estate attorney about your own situation. FHA and renovation-loan programs are subject to lender and program approval.