Best FHA 203(k) rehab mortgage lenders in 2024

If you’re buying a home in need of some work, you can get the financing for both the purchase and renovation through an FHA 203(k) loan, also known as a rehab loan. This type of FHA loan keeps things simple with one mortgage, one set of closing costs and one monthly mortgage payment. Here is Bankrate’s guide to the best 203(k) rehab mortgage lenders in 2024.

Bankrate’s Best FHA 203 (k) rehab mortgage lenders

• LowRates.com

• New American Funding

• Guaranteed Rate

• Flagstar Bank

• LoanDepot

• Fairway Independent Mortgage Corporation

Best FHA 203(k) rehab mortgage lenders

LowRates.com

Learn morein our Bankrate review

• Availability

• Loans offered

  Conventional, jumbo, FHA, VA, USDA

• Qualifying criteria

  • Credit requirements: 620 for conventional loans; 700 for jumbo loans; 500 for FHA and VA loans

  • Down payment minimum: 3% for conventional loans; 3.5% for FHA loans; none for VA and USDA loans

New American Funding

Learn morein our Bankrate review

• Availability

• Loans offered

  Conventional, jumbo, FHA, VA, USDA, fixed-rate, adjustable-rate; rate-and-term, cash-out and streamline refinancing; home equity line of credit (HELOC); investment property; flex-term; non-QM; reverse mortgages

• Qualifying criteria

  • Credit requirements: 620 for conventional loans

  • Down payment minimum: Undisclosed

Guaranteed Rate

Learn morein our Bankrate review

• Availability

• Loans offered

  Purchase and refinance, conventional, jumbo, FHA, VA, USDA, renovation loans, interest-only

• Qualifying criteria

  • Credit requirements: 620 for conventional and FHA loans; 580 for VA loans

  • Down payment minimum: Undisclosed

Flagstar Bank

Learn morein our Bankrate review

• Availability

• Loans offered

  Purchase and refinance; conventional, jumbo, FHA, VA, construction and renovation loans

• Qualifying criteria

  • Credit requirements: 620 for conventional loans and VA loans; 700 for jumbo loans; 580 for FHA loans

  • Down payment minimum: Unclear for conventional loans; 3.5% for FHA loans

LoanDepot

Learn morein our Bankrate review

• Availability

• Loans offered

  Purchase and refinance; conventional, jumbo, FHA, VA, construction and renovation loans

• Qualifying criteria

  • Credit requirements: 620 for conventional loans and VA loans; 700 for jumbo loans; 580 for FHA loans

  • Down payment minimum: Unclear for conventional loans; 3.5% for FHA loans

Fairway Independent Mortgage Corporation

Learn morein our Bankrate review

• Availability

• Loans offered

  Purchase and refinance; conventional, jumbo, FHA, VA, USDA; construction and renovation loans, reverse mortgage, physician loan

• Qualifying criteria

  • Credit requirements: Unavailable

  • Down payment minimum: 5% for conventional loans; 3.5% for FHA loans

Summary: Best FHA 203(k) mortgage lenders

• Methodology

  To determine the best FHA 203(k) rehab mortgage lenders, Bankrate evaluated 85 lenders based on several criteria, including affordability (APR, discounts and/or incentives); scope of loan offerings; customer reviews; and online capabilities. Our methodology creates a five-star scoring system, and each lender is assigned a Bankrate Score: The best lenders often have a Bankrate Score of 4.9 stars or higher. The Bankrate Score does not reflect a lender’s internal operations or practice but only considers a lender’s services and financial products.

FHA 203(k) loan FAQs

• What is an FHA 203(k) rehab loan?

  The FHA 203(k) loan, backed by the Federal Housing Administration (FHA), is geared towards homebuyers looking to renovate the home they’re purchasing. 203(k) loans tend to come with more competitive rates and require a smaller down payment and lower credit score compared to other kinds of loans. Like other FHA mortgages, 203(k) loans require you to pay a mortgage insurance premium with your monthly loan payment.

• How does a 203(k) loan work?

  A 203(k) loan bundles your mortgage and renovation funds into one loan. Once you close on the loan, a portion of the loan proceeds is paid to the seller of the home, and the remaining balance goes toward the renovations.
  
  To be eligible for a 203(k) loan, the home needs to be at least one year old, and renovation costs need to be a minimum of $5,000. In addition, the amount borrowed can’t be more than the area’s FHA loan limit, the home’s value after the renovation, or its value before the renovation, whichever is lowest.
  
  You also can’t use a 203(k) loan for just any project. You’ll need to comply with the requirements for eligible renovations, which include replacing the roof and floors, enhancing the home for accessibility reasons, or making energy efficiency improvements.

• Who qualifies for a 203(k) loan?

  If you’re interested in a 203(k) loan, you’ll need to meet the same requirements for a standard FHA loan:
  

  • A minimum credit score of 580

  • A debt-to-income (DTI) ratio of 50 percent or less (individual lenders may have higher or lower requirements)

  • The home is your primary residence and passes inspection once renovations are completed

• How do I find and compare 203(k) lenders?

  Finding and comparing the best 203(k) lenders can take time. Start by reviewing Bankrate’s list of FHA lenders (many of whom service 203 (k) mortgages to compare rates and terms. Some lenders may have slightly different sets of criteria, and finding the best one for your financial situation is worth wading through the offerings. The U.S. Housing and Urban Development’s (HUD) online database of approved HUD lenders can be a source, too.