LEARNING CENTER
Most of what people assume is excluded is actually fine. The real exclusions are narrower — and stranger — than expected.
Most of what people assume is excluded is actually fine. The real exclusions are narrower — and stranger — than expected.
Borrowers arrive expecting the 203k to be restrictive, and then discover it will finance a full kitchen gut, a new roof, a rewire, and a second bathroom. Then they ask about a pool and hit a wall.
FHA finances work that repairs, improves, modernizes, or makes a home safe and habitable. It does not finance luxury items — things that are recreational or purely for enjoyment rather than the home's function and value.
That distinction does most of the work, and it's the reason some of the exclusions feel arbitrary. A pool is recreation. A deck, in most cases, is an improvement to the property's usable structure. The line isn't about cost.
- The Limited 203k prohibits all structural work, regardless of budget, and caps total rehabilitation cost at $75,000.
- The Standard 203k allows structural work, requires at least $5,000 of rehabilitation, and is bounded by the county FHA mortgage limit.
Systems and mechanicals HVAC replacement, ductwork, boilers, furnaces, water heaters, full plumbing replacement, electrical rewiring, service panel upgrades, well and septic repair or replacement.
Roof, siding, exterior Roof replacement, gutters, soffit and fascia, siding, exterior painting, window and door replacement, masonry repair, chimney work.
Kitchens and bathrooms Complete gut-and-replace. Cabinets, counters, fixtures, tile, plumbing relocation within the existing footprint, adding a bathroom where the structure allows.
Interior finishes Flooring of every type, drywall, plaster repair, interior paint, trim, interior doors, stairs and railings.
Structural — Standard only Foundation repair, framing repair or replacement, load-bearing wall modification, additions, second stories, dormers, garage conversion to living space, basement underpinning.
Health and safety Lead paint stabilization and abatement, asbestos abatement, mold remediation, radon mitigation, code violations, handrails and egress.
Accessibility Ramps, widened doorways, roll-in showers, grab bars, stair lifts, accessible kitchens. FHA is notably supportive here.
Energy efficiency Insulation, air sealing, high-efficiency systems, replacement windows, and in many cases solar. The Energy Efficient Mortgage can layer additional capacity on top.
Appliances Ranges, refrigerators, dishwashers, washers and dryers, microwaves — when they're part of the renovation rather than a standalone shopping trip.
Site work Grading and drainage, driveways, walkways, retaining walls where they serve a functional purpose, and landscaping that addresses a property condition.
Soft costs Consultant fees, permits, architectural and engineering fees, inspection fees, and the contingency reserve all go into the financed amount rather than out of pocket. This is more money than borrowers expect.
Mortgage payments during renovation On a Standard 203k where the home will be uninhabitable, up to six months of payments can be financed. Worth knowing if you're carrying rent simultaneously.
- Swimming pools. Repairing an existing pool to a safe condition is generally permitted; installing a new one is not. More on pools.
- Work already completed before closing. The program finances future work. A seller who renovates the kitchen and raises the price is selling you a renovated house, not a 203k project.
- Anything not permanently affixed. Furniture, decor, portable appliances.
- Business use improvements. On a mixed-use property, only the residential portion.
Decks and patios. Generally eligible as functional improvements, though an elaborate outdoor living installation can attract scrutiny. A deck replacing a rotted one is easy; a two-level composite entertaining space with a built-in grill is a conversation.
Detached garages. Repair and replacement are typically fine. New construction of a detached garage is more variable and depends on the appraiser's view of whether it's customary for the market.
Fencing. Eligible when it serves a functional purpose — security, a pool enclosure required by code, property delineation. Decorative fencing is weaker.
Finished basements. Eligible, with the caveat that egress and moisture issues have to be addressed properly. On a Standard, underpinning to gain ceiling height is structural and allowed.
Solar. Generally eligible as an energy improvement when owned rather than leased. A leased system or a PPA creates title complications that are their own problem.
Landscaping. Eligible when it addresses a condition — drainage, erosion, a dead tree threatening the structure. Ornamental landscaping for its own sake is a harder sell.
The consistent pattern in the gray areas: function passes, indulgence doesn't. When you're unsure, the question to ask is whether the item addresses the property's condition or value, or whether it's there to be enjoyed.
Not by a published list. By your consultant, writing the scope, and your lender, approving it.
The consultant knows what their lender partners have approved before and what gets returned. Raise anything questionable at the initial inspection — before the write-up is drafted — rather than discovering in underwriting that a $9,000 line item isn't eligible and the project no longer works.
If the scope genuinely includes luxury items you're unwilling to drop, that's a signal to look at HomeStyle, which has no equivalent luxury exclusion and will finance a pool.
- FHA finances repair, improvement, modernization, and health-and-safety work. It excludes recreational luxury items.
- Pools, hot tubs, saunas, outdoor kitchens, sport courts, and gazebos are out. New construction of those, at least — repairing an existing pool to safe condition usually isn't.
- Structural work requires the Standard program. No budget makes it eligible on a Limited.
- Soft costs — consultant, permits, architectural fees, contingency — are financed, not out of pocket.
- Gray areas resolve on function versus indulgence. Raise them at the initial inspection.
- If luxury items are non-negotiable, HomeStyle is the program that finances them.
Eligibility questions are cheap to ask before the write-up and expensive to discover in underwriting. Get matched with a lender who can answer them in one call.
Get straight answers about your scenario — no pressure, no call center.