Which Lenders Offer FHA 203(k) Loans?

If you’re considering buying or renovating a home, you’ve likely heard of FHA 203(k) loans—an essential financing option for homebuyers and homeowners looking to combine the cost of purchase or refinance with renovation expenses. However, finding a lender that offers FHA 203(k) loans can be a challenge, and in 2024, it has become harder than ever.

Only fifteen years ago, there were 1,934 mortgage lenders offering FHA 203(k) loans. Fast forward to today, and that number has plummeted to just 227 lenders nationwide. Even more striking, only 68 lenders originate 10 or more FHA 203(k) loans per year. While the decline in participation might seem alarming, it underscores the importance of working with a knowledgeable lender and loan officer who truly understand the complexities of renovation lending.

Why the Decline in FHA 203(k) Lenders?

The FHA 203(k) program has always been more complex than a standard mortgage loan. It requires additional processes like contractor bids, inspections, and escrow accounts, which can be daunting for lenders who lack the proper systems, support staff, or experience. Many lenders have simply chosen to step away from offering these loans, leaving a much smaller pool of specialists in the market.

While the decline might make it harder to find a lender, it also highlights an important truth: bigger isn’t always better. Just because a lender originates a high volume of FHA 203(k) loans does not necessarily mean they are the best at handling them. Loan officers who specialize in renovation lending, combined with a company that supports their efforts with efficient systems and knowledgeable staff, are often a better choice than larger institutions with little focus on customer service.

How to Choose the Right FHA 203(k) Lender

When selecting a lender for your renovation loan, consider the following factors:

Experience: Work with a loan officer who has a proven track record with FHA 203(k) loans.

1. Support Staff: Companies with dedicated renovation loan teams can make the process smoother and faster.
2. Communication: Renovation loans involve many moving parts—choose a lender who is proactive and transparent about each step.
3. Knowledge of the Process: The right loan officer should guide you through contractor bids, draw schedules, and inspections with ease.

By focusing on these key areas, you can avoid the frustration that sometimes accompanies renovation loans and make your project a success.

FHA 203(k) Loan Production Breakdown (HUD Fiscal Year 2023-2024)

HUD’s fiscal year runs from October 1st through September 30th. The following table shows the nationwide production of FHA 203(k) loans by lender for HUD fiscal year 2023-2024:

Final Thoughts

The FHA 203(k) loan remains an invaluable tool for transforming homes, but with fewer lenders offering it, finding the right partner is more critical than ever. Rather than focusing solely on lender volume, seek out loan officers who bring expertise, attention to detail, and a strong support team. By choosing the right professional, you’ll ensure that your renovation loan experience is smooth and successful.

If you’re ready to begin your renovation journey, take the time to research lenders and consult with a loan officer who specializes in FHA 203(k) loans. Your dream home—whether through purchase or renovation—is closer than you think!

Jennifer Goldsby, NMLS #591226

VP, Renovation Lending

Diamond Residential Mortgage Corporation NMLS #186805

Equal Housing Opportunity

Disclaimer: The postings here reflect my personal opinion. They do not necessarily represent the opinions of Diamond Residential Mortgage Corporation and its management.