If you’ve been looking at homes in Metro Detroit, you’ve probably run into the same thing a lot of buyers are seeing right now. Move-in-ready houses get bid up fast, and the ones that need work sit on the market longer. That gap is exactly what the FHA 203(k) program was built for. It lets you buy a home based on what it can become, not just what it looks like today, and finance the purchase and the renovation in one loan.

There are two versions of this loan, and knowing the difference matters before you write an offer.

What Is an FHA 203(k) Loan?

An FHA 203(k) is a government-backed loan that wraps your renovation costs into a single mortgage. Most buyers use it to purchase a home and finance the improvements it needs in one loan, closing once instead of buying a house and then separately hunting for a way to pay for the new roof or kitchen. But it also works as a refinance. If you already own a home and want to finance a renovation, a 203(k) refinance lets you roll the cost of the work into a new mortgage on the home you’re already in, rather than taking out a separate loan for the project.

There are two versions: the Standard 203(k) (sometimes called the Full 203(k)) and the Limited 203(k) (also called the Streamline). They’re built for different scopes of work.

Standard 203(k) vs. Limited 203(k): 4 Key Differences

1. Scope of Renovation Projects The Standard 203(k) is built for bigger jobs: structural repairs, room additions, and major overhauls that require multiple trade contractors and permits. The Limited 203(k) is meant for smaller, non-structural work, like kitchen or bath updates, flooring, and other cosmetic or energy-efficiency improvements. All contractors need to be licensed and insured on both the Limited and Standard 203(k). It is recommended that you use a General Contractor and have them find the sub-contractors needed. Getting estimates from each sub-contractor will create a paperwork nightmare since the required documentation to vet the contractor will be required for each sub-contractor.

2. Maximum Renovation Amount This is where the program has changed the most. The Limited 203(k) repair cap now sits at $75,000, up from the old $35,000 limit. That gives buyers a lot more room to renovate without needing to step up to a Standard 203(k). The Standard 203(k) doesn’t have a fixed renovation cap. Instead, your total loan (purchase plus renovation, based on the home’s after-improved value) is capped by the FHA loan limit for your county. For 2026, that limit is $541,287 across every county in Metro Detroit and throughout Michigan: Wayne, Oakland, Macomb, and beyond.

3. Application and Approval Process The Standard 203(k) involves more moving parts. You’ll need contractor bids, a detailed scope of work, and a HUD consultant who oversees the project. The Limited 203(k) has a lighter process. A HUD consultant is optional rather than required, and there’s less documentation overall, which typically means a faster path to closing.

4. Timeline to Complete the Work You now have more time to finish renovations than in years past: 12 months for a Standard 203(k) (up from 9), and 9 months for a Limited 203(k) (up from 6). If repairs mean you can’t live in the home during the work, that’s also more forgiving now. The threshold for what counts as a “major” disruption to occupancy moved from 15 days to 30.

What Actually Counts as Your Total Renovation Cost

This is the part that trips people up the most, and it’s worth spelling out clearly. When I tell a buyer the contractor’s estimate needs to stay under a certain number to fit within the Limited 203(k) cap, I usually get a confused look. That’s because the $75,000 cap isn’t just the contractor’s bid. It’s the total renovation cost, and the loan program allows several other items unique to the 203(k) process to be rolled in under that same number.

Here’s what typically counts toward that total, beyond the contractor’s estimate:

• Contingency reserve: A cushion built into the loan for cost overruns or surprises once work starts.
• Post-closing inspection fees: The draw inspections your consultant performs throughout construction.
• Building permits: Any permits required for the work being done.
• Supplemental origination fees: Additional fees some lenders charge based on the size of the renovation.
• Architectural fees: Costs for any plans or drawings the project requires.
• Mortgage payment reserve: Up to 12 months of PITI (principal, interest, taxes, and insurance) if the home won’t be livable during renovation.

All of that gets added together, not just the contractor’s number. So if you’re working toward a $75,000 cap on a Limited 203(k), the contractor’s estimate itself often needs to come in well under that, sometimes $10,000 to $15,000 under, to leave room for everything else. This is one of the most common points of confusion I run into, and it’s worth understanding upfront so your renovation budget doesn’t come as a surprise later in the process.

A HUD 203(k) consultant shows up in this process differently depending on which loan you’re using, and understanding their role helps explain why the Standard 203(k) takes longer to close.

When a consultant is required A HUD-approved consultant is mandatory on every Standard 203(k) loan, regardless of project size. On a Limited 203(k), a consultant isn’t required, but it’s worth considering one anyway if your project involves multiple contractors or you’re not confident scoping the work yourself. Many lenders and Realtors recommend it even when it’s optional.

What the consultant actually does Their responsibilities typically include:

• Feasibility visit: An initial walkthrough of the property to confirm the renovation is realistic under 203(k) guidelines before you go further.
• Work write-up: A detailed report covering required repairs, recommended work, and any additional improvements you want. This becomes the blueprint for your renovation budget and contractor bids.
• HUD compliance: Making sure the finished scope of work meets HUD’s minimum property standards, not just your personal wish list.
• Draw schedule and inspections: Setting how many draws (payments to your contractor) the project will have, then inspecting completed work at each stage before funds are released.
• Contingency reserve: Determining how much of your loan gets set aside as a cushion for cost overruns or surprises once the work starts.

Because they’re inspecting draws throughout construction, a good consultant functions a lot like a project manager looking out for your interests. That’s part of why lenders require one on larger, more complex jobs.

How consultant fees are determined HUD sets a fee schedule that caps what a consultant can charge, based on the total cost of repairs:

• Up to $1,000 for repairs of $50,000 or less
• Up to $1,200 for repairs between $50,001 and $85,000
• Up to $1,400 for repairs between $85,001 and $140,000
• Up to 1% of repair costs (capped at $2,000) for repairs above $140,000, plus $25 per additional unit on multi-unit properties

Consultants can also charge up to $375 for an optional feasibility study, up to $375 per draw inspection, up to $120 for a change order, and up to $225 for a reinspection, plus mileage if their office is more than 15 miles from the property.

The good news: on both the Standard and Limited 203(k), the consultant’s fee can now be rolled into your loan rather than paid out of pocket. That used to be a real friction point on Limited 203(k) projects.

Which One Is Right for You?

If you’re looking at a home that needs cosmetic work, like new floors, an updated kitchen or bath, or some energy-efficiency upgrades, the Limited 203(k) will likely get you there with less paperwork and a shorter runway to closing. Most buyers who qualify for either option lean toward the Limited version specifically because it doesn’t require a HUD consultant. Skipping that requirement saves both time and money: no feasibility visit or work write-up fee to pay, and no waiting on a consultant’s inspection at each stage of the project. If you’re eyeing something that needs structural work, an addition, or a full gut renovation, the Standard 203(k) is built for that scope, even though it takes more coordination up front.

The Bottom Line

With inventory still tight across Metro Detroit, homes that need work are often the ones with the least competition. The FHA 203(k) program gives you a realistic way to buy one and make it yours, and it works just as well if you’re already in a home and want to finance a renovation through a refinance instead. Between the higher Limited 203(k) cap, longer renovation timelines, and financeable consultant fees, the program is more workable today than it’s been in years. Whether you’re eyeing a fixer-upper or looking to renovate the home you already own, let’s look at your numbers and figure out which version of the 203(k) fits your project.