FHA 203(k) Loan

In this context, FHA stands for Federal Housing Administration (not Feral Hedgehog Assistant or Fantastic Harp Aria...if those are the definitions you’re looking for, we don’t know what glossary they're in, but this isn’t it).

FHA loans consist of money lent out for mortgages, with the federal government providing a guarantee to the lender that the loan will get paid back. It helps people get loans who might not otherwise qualify, with the government providing a backstop to keep the bankers from sweating themselves to sleep at night.

A 203K loan is a particular kind of FHA-supported product. Specifically, it provides money not just for a mortgage, but for renovations as well.

Looking to buy a fixer-upper for your feral hedgehogs? A 201K loan might be for you.

Related or Semi-related Video

Finance: What is the Federal Housing Aut...11 Views

00:00

Finance a la shmoop what is the Federal Housing Authority or FHA? alright so

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before 1934 a whole bunch of homes were doing this leaving a whole bunch of [Home crumbles to the ground]

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people well doing this then along came the National Housing Act of 1934 thank

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you FDR which created the FHA which served to stabilize the process of

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building and buying homes and you can imagine that Home Building is a big fat [A house of cards appears]

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house of cards when it's not well-managed shoddy workmanship allows

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homes to fail in the first breath of wind the wolves out there so that

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insurance companies are loathe to pay when they fall and so banks then are

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loathe to lend money to would-be home builders and buyers and would you

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believe it before the FHA normal home loans were only three to five years like

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you'd borrow at today's dollars say 200 grand to buy a home and you'd be

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expected to pay it all off in just a few years yeah the greatest generation they

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were tougher than we are today they could actually do that so who could

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afford to buy a home yeah pretty much nobody, nobody but the rich already rich

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yeah so nobody then in that environment does a whole lot of nothing and a lot of [Man discussing home buyers]

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people were very homeless and very unhappy and if you think about the way

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wealth has been created in this country a lot of it's been through or even most [Young man and woman taking down a for sale sign]

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of it's been through homeownership so in those days people really didn't have the

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opportunity it was not a fair world well the FHA set basic standards that

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serve to improve building and housing conditions so that everyone wasn't

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susceptible to you know the big bad wolves huffing and puffing and a home as [Wolf walks past house and blows it down]

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long as it wasn't made of straw actually had a chance of staying intact for a few

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years and this was possible this was not high-tech look at Europe the homes they

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have there or three four five hundred years old built out of brick Union labor

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or non-union labor I guess with the king and they're doing just fine so go Europe! [Man holds up EU flag]

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yeah you have to win one every now and then and now the typical home loan in

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America anyway is about 30 years rather than three to five giving everyone ample

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opportunity to pay hundreds of thousands of dollars in interest over the course

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of repayment and the FHA sprays WD-40 on the tracks [Peron sprays WD-40 on train tracks]

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of the banks you know who are then a lot more willing to loan that money and make

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a whole lot more money for themselves thank you American capitalist system so

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yeah thank goodness auto-pay came around so that you don't have to feel pain

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every month when you write that mortgage check you know just ask everyone who

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owns a home feels it and we feel your pain

Find other enlightening terms in Shmoop Finance Genius Bar(f)