
Buying a Fixer-Upper? A 10-Step Guide to FHA 203K Loans
If you’re thinking about buying a home that needs some work, an FHA 203K loan might be the perfect solution. It allows you to roll the cost of repairs and renovations into your mortgage, making it easier to turn a fixer-upper into your desired home.
Now, if you’re wondering about the 203k buying process or not sure how to start, this 10-step guide was put together to walk you through what to expect from the offer to closing. Whether you're a first-time buyer or an experienced homeowner, this will help you stay on track and avoid delays.

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First, What’s the Difference Between Standard and Limited 203K Loans?
Before we jump into the steps, you should know that FHA 203K loans come in two types:
- Limited 203K Loan – Covers smaller renovations up to $75,000 and only requires a contractor’s bid.
- Standard 203K Loan – For larger renovations over $75,000, requiring a Cost Consultant along with a contractor’s bid.
Now that we’ve covered the basics, let’s dive into the 10 steps!
Step 1: Choosing the Right Property
You can use an FHA 203K loan to purchase:
Each property type has a maximum loan limit, which varies by location. Be sure to check what limits apply in your area before moving forward.
Step 2: Making an Offer
Your offer needs to factor in:
If possible, meet with a contractor before making an offer. That way, you’ll have a clearer idea of how much the necessary renovations will cost. The final loan amount will be based on either the purchase price plus repairs OR 110% of the after-improved value—whichever is lower.
Step 3: Submitting the Offer
When submitting your purchase contract, you can state that you are financing with an FHA 203k Loan.
Since 203K loans involve an extra step or two, closing usually takes 45 to 60 days. Work with your lender to ensure your contract allows enough time for all the necessary approvals.
Step 4: Getting Repair Estimates
Now that your offer is accepted, it’s time to finalize the scope of work with a contractor or Cost Consultant (if required).
This step includes:
Step 5: Ordering the Appraisal
The lender will now order an appraisal to determine the “after-improved value” of the home. This value is based on:
Step 6: Finalizing the Loan Amount
Once the appraisal is complete, your lender will finalize your loan amount. Here’s how it works:
Step 7: Loan Approval & Signing the Final Documents
At this stage, your loan is submitted for final approval. Once approved, you’ll sign your final loan documents and get ready for closing.
Step 8: Loan Disbursement & Funding
This is when everything comes together! The loan funds are disbursed, covering:
Step 9: Closing & Welcome Package
Once everything is finalized, your loan officially closes! Shortly after, your lender will typically send you a 203K welcome package related to your renovation funds.
Step 10: Inspections & Final Payouts
Once the work begins, funds are released in phases:
The renovation must be completed within nine or twelve months, depending on whether it’s a Limited or Standard 203k. Any leftover funds can either go toward additional improvements (if approved) or be applied to your loan principal.
Ready To Get Started
Now that you know what to expect, you’re one step closer to buying and renovating your dream home! If you still have questions, be sure to reach out to a 203K specialist for your area to guide you through the process.
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