Getting a loan is one of the most important financial decisions many Americans make. From buying a home to paying for repairs or covering unexpected expenses, there are federal and state programs that offer special conditions, such as lower down payments or more flexible requirements. The FHA 203(k) loan, a mortgage insured by the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD) combines the price of the home and the cost of repairs, including materials and labor, in one loan. How does the loan work? According to HUD, there are two versions: - Limited 203(k): Lets homebuyers and homeowners add up to $75,000 to their mortgage for repairs and upgrades that are not structural. HUD raised the limit from $35,000 in 2024, the first increase since 2005. - Standard 203(k): Designed for major projects, such as structural repairs or additions. Repairs must cost at least $5,000, and the total loan must stay within the FHA limit for the area, which varies by county. People who already own a home that needs repairs can also use the program to refinance. The money can be used for roofs, plumbing, flooring, kitchens and bathrooms, heating and cooling systems, windows, energy improvements, and accessibility upgrades. Luxury projects, such as tennis courts, gazebos, or new pools, are not covered. Who can apply for the loan that helps you repair a property The loan is meant for homes that will be the borrower’s primary residence, so investors and house flippers do not qualify. The requirements are similar to those of a regular FHA loan: - A credit score of 580 or higher allows a 3.5% down payment. - With a score between 500 and 579, the down payment rises to 10%. Some lenders may ask for higher scores. What is the money flow for this loan The FHA doesn’t lend money: it insures the loan. Borrowers must apply through a bank, credit union, or other FHA-approved lender, and not all of them offer this program. The repair money goes into an escrow account and is paid to contractors as the work is completed. Under HUD rules updated in 2024, borrowers have up to 12 months to finish the work with a standard loan and nine months with a limited loan. The program also has costs: borrowers pay an upfront mortgage insurance premium and an annual premium collected monthly, and the paperwork can take time.