FHA Renovation Loan Requirements and Approved Renovation Types

An FHA Renovation Loan is a government-insured mortgage that allows eligible borrowers to purchase or refinance a home and finance renovation costs within the same loan. The most common version is the FHA 203(k) loan, which combines home price, renovation expenses, and closing costs into one FHA-backed mortgage.

This loan is designed for homes that need repairs, updates, or safety improvements and must meet FHA eligibility and property standards after renovations are completed.

What Is an FHA 203(k) Loan?

An FHA 203(k) renovation loan is a specific FHA loan program that supports residential property improvements. It is regulated by the U.S. Department of Housing and Urban Development (HUD) and is available nationwide, including Columbus, Ohio.

There are two main FHA 203(k) options:

• Limited 203(k) – For smaller, non-structural repairs

• Standard 203(k) – For major or structural renovations

Both options require that renovations improve the home’s safety, functionality, or livability.

What Are the Basic FHA Renovation Loan Requirements?

To qualify for an FHA Renovation Loan, borrowers must meet several standard FHA criteria.

Borrower Eligibility Requirements

• Minimum credit score typically starting at 580 (higher scores may improve approval chances)

• Debt-to-income ratio within FHA guidelines

• Stable income and employment history

• Property must be a primary residence

Property Eligibility Requirements

• 1–4 unit residential property

• Home must meet FHA minimum property standards after renovations

• Renovations must be completed by FHA-approved contractors

• Work must begin within 30 days of loan closing

What Renovation Types Are Approved Under an FHA 203(k) Loan?

Approved renovations must permanently improve the property and comply with FHA rules.

FHA 203(k) Approved Renovation Types

• Roof replacement or repair

• HVAC system upgrades

• Plumbing and electrical improvements

• Kitchen and bathroom remodeling

• Flooring replacement

• Accessibility improvements

• Energy-efficient upgrades

• Structural repairs (Standard 203(k) only)

• Basement finishing (livable space only)

Luxury items such as swimming pools, outdoor kitchens, or purely cosmetic landscaping are not allowed.

What Renovations Are Not Allowed?

The FHA restricts renovations that do not improve habitability or safety.

Disallowed Renovation Examples

• New swimming pools

• Hot tubs or spas

• Outdoor fireplaces

• Tennis courts

• Purely decorative upgrades without functional benefit

All renovations must be permanently affixed to the property and contribute to long-term value.

How Does the FHA 203(k) Loan Process Work?

The process follows a structured timeline:

1. Borrower applies for an FHA 203(k) loan

2. Property appraisal is based on after-improvement value

3. Contractor bids are reviewed and approved

4. Loan closes with renovation funds held in escrow

5. Repairs are completed under FHA timelines

6. Final inspection confirms compliance

Funds are released in stages, known as draws, as work progresses.

How Can a FHA 203(k) Loan Calculator Help?

An FHA 203(k) loan calculator helps estimate:

• Total loan amount

• Monthly mortgage payment

• Renovation budget limits

• FHA mortgage insurance costs

These calculators provide estimates only and should be paired with lender review for accuracy.

Local Columbus Considerations for FHA Renovation Loans

In Columbus, Ohio, FHA renovation projects must comply with:

• Franklin County building codes

• City of Columbus permit requirements

• Local inspection standards for safety and habitability

Renovation work may require permits filed with local municipal offices, and final inspections may be required before escrow funds are fully released.

Common Uses of FHA Renovation Loans in Columbus

• Updating older homes in established neighborhoods

• Repairing FHA-ineligible properties for purchase

• Improving safety and livability in aging housing stock

• Converting outdated layouts into functional living spaces

Frequently Asked Questions (FAQ)

What credit score is required for an FHA Renovation Loan?

Most lenders require a minimum credit score of 580, though higher scores may improve approval chances.

Can I use an FHA 203(k) loan to buy a fixer-upper?

Yes. FHA 203(k) loans are commonly used to purchase homes that need repairs to meet FHA standards.

Are contractors required for FHA renovation loans?

Yes. FHA requires licensed and approved contractors. Self-repairs are generally not allowed.

How long do renovations take under FHA guidelines?

Most renovations must be completed within six months, depending on project scope.

Is mortgage insurance required on FHA renovation loans?

Yes. FHA renovation loans include both upfront and annual mortgage insurance premiums.

Can I refinance using an FHA 203(k) renovation loan?

Yes. FHA 203(k) loans can be used for refinancing to fund renovations.

Conclusion

An FHA Renovation Loan provides a structured way to finance home improvements while meeting federal housing standards. For buyers and homeowners in Columbus, understanding FHA requirements, approved renovation types, and local compliance rules is essential for a successful renovation loan experience. When navigating FHA renovation loan guidelines and property eligibility, working with an experienced FHA-approved lender such as Go Mortgage can help ensure requirements are followed accurately and efficiently.