Finding an affordable home in Texas often means looking at older houses or fixer-uppers that need a new roof, updated plumbing, or foundation work before they can pass a standard mortgage appraisal.
This guide explains how an FHA 203(k) loan in Texas lets you roll both the home purchase (or refinance) and the renovation budget into a single mortgage, comparing the Limited 203(k) and Standard 203(k) rules under HUD Handbook 4000.1.
Check Your Texas Renovation Loan Eligibility
You will learn which repairs qualify, how the $75,000 Limited cap and $5,000 Standard minimum work, how Texas county FHA loan limits cap your total budget, and what to expect from pre-approval through your contractor's final draw.
What Is an FHA 203(k) Loan?
An FHA 203(k) rehabilitation mortgage is a government-insured loan backed by the Federal Housing Administration (FHA) that lets you buy or refinance a primary residence and finance the cost of repairs in one loan.
When you try to buy a fixer-upper with a standard FHA loan in Texas, the home must already meet HUD's Minimum Property Requirements—meaning it must be "safe, sound, and secure" before closing. If the roof is failing, the HVAC is broken, or the foundation has shifted, the appraiser will note each needed repair with a cost to cure, which can complicate a standard FHA purchase.
A 203(k) loan solves that problem by basing your mortgage on what the home will be worth after the work is done, alongside the current value plus repair costs. The repair money is then paid out to contractors in draws as the work moves forward.
Limited 203(k) vs. Standard 203(k) in Texas
FHA offers two versions of the 203(k) renovation loan, and choosing the right one depends on your repair budget and whether the home needs structural work. All rules below come from HUD Handbook 4000.1 (Update 18, issued August 12, 2026).
| Feature | Standard 203(k) | Limited 203(k) |
|---|---|---|
| Best for | Major remodeling, structural work, additions, and foundation repair | Minor remodeling and nonstructural repairs only |
| Repair budget limits | Minimum $5,000 in eligible improvements; no dollar cap other than county FHA mortgage limits | Maximum $75,000 in total rehabilitation costs (energy improvements can be added on top of the $75,000) |
| 203(k) Consultant | Required (selected by the lender from FHA's Consultant Roster) | Not required, though one may be used |
| Completion deadline | Set by lender, not to exceed 12 months | Not to exceed 9 months |
| Contractor draw schedule | Paid per the approved draw schedule | Maximum 4 draw requests per contractor (initial draw at closing, up to 2 intermediate draws, and 1 final draw) |
| Mortgage payment reserves | Financeable | Not financeable |
Standard 203(k): For Major Rehab and Structural Repairs
The Standard 203(k) is built for properties that need heavy lifting. You must have at least $5,000 in eligible improvements, and there is no standalone cap on repair costs as long as your total loan stays within your Texas county's FHA loan limit.
Because these projects are complex, your lender must select an FHA-approved 203(k) Consultant from FHA's official roster. The consultant inspects the home and prepares the Work Write-Up and Cost Estimate.
Limited 203(k): For Cosmetic and Non-Structural Updates
The Limited 203(k) is designed for straightforward, nonstructural projects where total rehabilitation costs do not exceed $75,000 (eligible energy improvements can be added above the $75,000 cap). According to HUD Handbook 4000.1, HUD reviews the $75,000 cap annually alongside nationwide FHA loan limits, so buyers should always confirm the current published cap with a participating lender.
Under a Limited 203(k), a project is considered "major" and is not allowed if it involves:
- Unit conversions, demolition and reconstruction, or foundation work
- Repairs that require a consultant's work write-up, or plans and architectural exhibits
- Work expected to take more than 9 months or require more than 4 draws per contractor
- Renovations that displace the borrower from the home for more than 30 days
Check Your Texas Renovation Loan Eligibility
Eligible vs. Ineligible Repairs Under HUD Rules
Whether you are updating a 1950s bungalow in San Antonio or repairing storm damage along the Gulf Coast, HUD has clear rules on what your 203(k) funds can and cannot pay for.
| Eligible Standard 203(k) Improvements | Ineligible Work (Both Standard & Limited) |
|---|---|
| Structural alterations, room additions, and foundation repair or elevation | New swimming pools (existing in-ground pools can be repaired or removed under Standard) |
| Roofing and windstorm shelters | Exterior hot tubs, spas, saunas, and bath houses |
| HVAC, plumbing, electrical, wells, and septic systems | Barbecue pits, outdoor fireplaces, and gazebos |
| Appliances, plus repairing or removing an existing in-ground pool | Tennis courts, satellite dishes, and photo murals |
| Converting a 1-unit to 2–4 units, adding an attached ADU, or reducing a multi-unit to 1–4 units | Tree surgery (unless removing a hazard) |
| Rebuilding on an existing foundation or relocating a structure onto a new foundation | Any improvement that does not become a permanent part of the real property |
| Energy improvements, accessibility improvements, and lead-based paint stabilization | Additions or renovations built for commercial use |
| Fences, walkways, driveways, decks, patios, porches, garages, and site work/landscaping |
Eligibility Requirements for a Texas Renovation Loan
Because the 203(k) is part of the FHA loan family, borrowers must meet standard Texas FHA loan requirements along with specific property and contractor rules.
Credit Score and Down Payment
HUD sets your minimum down payment using your Minimum Decision Credit Score (MDCS)—the middle of three credit bureau scores, or the lower of two. If multiple borrowers apply together, the lender uses the lowest MDCS among all applicants.
- 580 or higher credit score: Eligible for maximum financing on a purchase at 96.5% loan-to-value (LTV), which means a 3.5% minimum down payment. On a 203(k) refinance, borrowers with a 580+ score may qualify for up to 97.75% LTV.
- 500 to 579 credit score: Capped at 90% LTV for both purchases and refinances, requiring at least a 10% down payment.
- Below 500 credit score: Not eligible for FHA-insured financing.
- No credit score: Borrowers with insufficient or non-traditional credit histories may still qualify for maximum financing under manual underwriting rules.
Your 3.5% Minimum Required Investment may come from your own savings or an eligible gift from a family member, employer, labor union, close friend with a documented interest, charity, or government homeownership program. The required investment cannot come from the seller or anyone who benefits financially from the transaction, and a donor's gift cannot come from cash on hand. Interested parties (such as the seller) can contribute up to 6% of the sales price toward origination fees, other closing costs, prepaids, discount points, or the upfront mortgage insurance premium.
Debt-to-Income (DTI) Ratios
If your loan is approved through FHA's automated underwriting system (TOTAL Scorecard), the system sets the acceptable debt ratios based on your overall credit profile. If your file requires manual underwriting, HUD Handbook 4000.1 applies standard ratio caps ranging from 31% housing / 43% total debt (with no compensating factors) up to 40% housing / 50% total debt for borrowers with a 580+ credit score and two verified compensating factors such as cash reserves, residual income, or a minimal housing payment increase.
Occupancy and Eligible Property Types
You must intend to use the home as your principal residence. At least one borrower must move in within 60 days of signing the security instrument and intend to live there for at least one year.
Eligible properties include:
- 1- to 4-unit detached or semi-detached homes (a 1-unit property with one Accessory Dwelling Unit counts as a 1-unit property)
- Townhouses and row houses
- Manufactured housing that meets FHA standards
- Units in FHA-approved condominium projects, as well as townhouse-style condos separated by 1.5-hour firewalls that qualify as single-unit structures
Commercial enterprises, vacation homes, boarding houses, hotels/motels, and properties that will remain encumbered by a PACE (Property Assessed Clean Energy) obligation are ineligible.
FHA Mortgage Insurance (MIP)
Like a standard FHA loan, a 203(k) mortgage includes two forms of mortgage insurance:
- Upfront MIP (UFMIP): 1.75% (175 basis points) of the base loan amount, which may be financed into the loan.
- Annual MIP: Paid monthly. For a typical 30-year loan at or below $726,200 with a 3.5% down payment (over 95% LTV), the annual MIP is 0.55% of the base loan amount for the life of the mortgage.
Check Your Texas Renovation Loan Eligibility
How Texas FHA Loan Limits Cap Your 203(k) Budget
Your renovation budget does not exist in a vacuum—your combined purchase price and financed repair costs must fit inside your county's FHA loan limit and HUD's valuation formula.
Under HUD Handbook 4000.1 (Section II.A.8.a.ix), the maximum insurable 203(k) purchase mortgage is the lesser of:
- The Valuation Calculation: Your applicable LTV (such as 96.5% for a 580+ score) multiplied by the lesser of:
- (a) The Adjusted As-Is Value plus financeable repair costs, fees, contingency reserves, and (for Standard 203(k) only) mortgage payment reserves; or
- (b) 110% of the After-Improved Value (100% for condominiums).
- The County FHA Mortgage Limit: The published 2026 Texas FHA loan limit for the county and unit count.
2026 FHA Loan Limits Across Texas Markets
These are the current published CY2026 limits from HUD's Mortgage Limits lookup, which can change each year—confirm the limit for your county with a participating lender when you apply.
| Texas Market / Counties | 1-Unit Limit | 2-Unit Limit | 3-Unit Limit | 4-Unit Limit |
|---|---|---|---|---|
| Austin Metro (Bastrop, Caldwell, Hays, Travis, Williamson) | $571,550 | $731,700 | $884,450 | $1,099,150 |
| Dallas–Fort Worth Metro (Collin, Dallas, Denton, Ellis, Hunt, Johnson, Kaufman, Parker, Rockwall, Tarrant, Wise) | $563,500 | $721,400 | $872,000 | $1,083,650 |
| San Antonio Metro (Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina, Wilson) | $557,750 | $714,000 | $863,100 | $1,072,600 |
| Houston Metro & Standard Floor (229 of 254 counties, including Harris, Fort Bend, Montgomery, Galveston, Brazoria, El Paso, Hidalgo, Lubbock, Nueces, Bell, McLennan) | $541,287 | $693,050 | $837,700 | $1,041,125 |
(Note: Glasscock County is a non-metro statistical outlier in HUD's 2026 lookup at $813,050 for a 1-unit property; confirm with a lender before relying on that figure.)
For example, if you are buying a single-family fixer-upper in Harris County (Houston), your total base 203(k) loan—including both the purchase and all financed renovations, fees, and contingency reserves—cannot exceed $541,287. In Travis County (Austin), that ceiling rises to $571,550.
Step-by-Step: How the FHA 203(k) Process Works in Texas
Closing a 203(k) loan has more moving parts than a standard purchase, so knowing the order of operations keeps your contract on track.
1. Get Pre-Approved with a 203(k)-Experienced Lender
Start by reviewing your credit, income, and assets so you know your maximum combined purchase-plus-rehab budget for your target Texas county. Rates are set daily by lenders and the market, so a participating lender can quote your options once they review your file.
2. Find a Fixer-Upper and Sign a Purchase Contract
Look for a home whose purchase price leaves enough room below the county FHA limit and after-improved value to cover the repairs. Let the seller know upfront you are using an FHA 203(k) loan so your contract timeline accounts for contractor bids and consultant work.
3. Meet Your 203(k) Consultant (Standard) and Gather Contractor Bids
If you are using a Standard 203(k), your lender will select a 203(k) Consultant from FHA's Consultant Roster to inspect the property and prepare the Work Write-Up and Cost Estimate. For a Limited 203(k), a consultant is not required, though one may be used; you will work with your contractors and lender on the repair plan.
4. Order the FHA Appraisal
The FHA appraiser reviews your purchase contract alongside the Work Write-Up or contractor bids to determine the home's After-Improved Value (and, when needed, the As-Is Value). Under HUD rules, the appraisal is valid for 180 days from its effective date.
5. Close on the Mortgage
Once underwriting signs off on your income, credit, appraisal, and repair plan, you close on a single loan that covers both the purchase and the financed repairs.
6. Complete Renovations and Manage Draws
Work begins shortly after closing.
- On a Limited 203(k), each contractor can receive up to 4 draw payments (an initial draw at closing, up to two intermediate draws, and a final draw upon completion), and all work must finish within 9 months.
- On a Standard 203(k), funds are released per the draw schedule, and all work must finish within 12 months.
Check Your Texas Renovation Loan Eligibility
Who Is a Texas FHA 203(k) Loan Best For?
A 203(k) loan is not necessary for every buyer, but it can open doors across Texas housing markets when standard financing falls short:
- Buyers of older Texas homes with foundation or roof issues: If an older home needs foundation repair or a new roof, a Standard 203(k) lets you finance foundation repair and a new roof into the purchase.
- First-time buyers priced out of turnkey neighborhoods: Buying a dated home with a Limited 203(k) lets you finance up to $75,000 in minor remodeling and nonstructural repairs, with a 3.5% down payment at a 580+ credit score.
- House hackers buying 2- to 4-unit properties or adding an ADU: Because FHA allows 1- to 4-unit owner-occupied properties (and counts a 1-unit home with one ADU as a single-family residence), a Standard 203(k) can finance adding an attached ADU or converting a single-family home into a 2- to 4-unit property, subject to HUD's 3- to 4-unit self-sufficiency rental income test.
- Current homeowners who want to renovate: If you already own your home and want to remodel, a 203(k) refinance lets you roll renovation costs into a new FHA first mortgage rather than taking out a separate home equity loan under Texas home equity loan and HELOC rules.
(Note on down payment assistance: If you plan to pair your purchase with one of the Texas first-time homebuyer grants and programs, keep in mind that FHA 203(k) loans are not allowed in any TDHCA program, according to TDHCA's lender guide. TSAHC's guidelines list the Limited 203(k) among eligible FHA loans, so confirm current program rules with a participating lender before counting on state assistance for a renovation loan.)
Next Steps: Check Your Texas 203(k) Eligibility
Buying a fixer-upper with an FHA 203(k) loan comes down to matching the right program—Limited for nonstructural projects up to $75,000, or Standard for structural and major renovations of $5,000 or more—with a realistic repair budget that fits inside your Texas county's FHA loan limit. If you want to compare the 203(k) against other Texas home loan options or review the broader requirements to buy a house in Texas, our team can help you check your numbers, compare options, and get connected with the right loan path.
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