FHA 203(k) and VA Loans in Washington: Fixer Rules
Yes, you can move to Washington on an FHA or VA loan and buy a house that needs work, and you don't have to pay for the repairs out of pocket. An FHA 203(k) loan rolls the purchase and the repairs into one mortgage: the Limited version covers up to $75,000 of nonstructural work, and the Standard version handles bigger and structural jobs with a HUD-approved consultant. Fannie Mae's HomeStyle Renovation does the same thing on a conventional loan. And if you're using a VA loan, VA dropped five minimum property requirements, including the rules on detached structures and radon, for appraisals ordered after May 1, 2026.
Out here, the house that fits the budget is often the one with the tired roof, the flaking paint and the shop out back. That's not a dealbreaker if you know how the loan and the appraisal treat it. I sat down again with Roger Merrell Jr. of Merrell Inspection Services, a licensed Washington home inspector, HUD compliance inspector and HUD-approved 203(k) consultant who has done HUD and FHA work since October 1990. In Part 1 we covered manufactured homes, L&I permits and foundation certifications. This post is Part 2: renovation loans and appraisals, with the HUD, VA, Fannie Mae and state rules checked against the current documents.
Key Takeaways
- The FHA 203(k) Limited cap is $75,000 in total rehabilitation costs, up from $35,000. It's for nonstructural work only, a consultant is optional, and the work can't keep you out of the house for more than 30 days in total.
- The Standard 203(k) covers structural work and starts at $5,000 in repairs. A HUD-approved 203(k) consultant is required, and the lender can finance up to 12 months of mortgage payments while the home can't be lived in.
- Fannie Mae HomeStyle caps renovation costs at 75% of the lesser of price plus repairs or the as-completed value. On a manufactured home, the cap is 50% of the as-completed value and the work must be nonstructural.
- VA removed five appraisal rules for appraisals ordered after May 1, 2026. Detached improvements, non-vented heaters and the entire radon topic came out, and the paint rules were condensed.
- The FHA appraisal flag Roger sees most in Western Washington is flaking paint. On a home built in 1978 or later, the appraiser must require repair of defective paint that exposes the surface underneath to the weather.
- Wells and septic are routine here, with their own rules. FHA requires the water to meet the health authority's standards, and Washington requires a septic inspection at least every three years on a basic gravity system.
Why a Fixer Can Be the Smart Move Here
Most of my relocation buyers come from places where the inventory looked different. In Kitsap, Pierce and Mason counties, a lot of the homes with land, a shop or a little distance from the neighbors are older, and many of them need something. Buyers on FHA or VA financing often assume those homes are off the table. They usually aren't.
For context on price, the median residential sale price in October 2026 was $599,889 in Kitsap County (down 0.9% from a year earlier) and $572,000 in Pierce County (up 0.6%). Information and statistics compiled and reported by the Northwest Multiple Listing Service. The gap between a move-in-ready home and one that needs a roof and paint can be real money, and a renovation loan lets you finance the difference instead of saving it first.
If you're still working out the budget side, my post on the income needed to buy a home in Washington walks through that math, and this week's Kitsap mortgage rate update has the current Freddie Mac numbers.
FHA 203(k) Limited vs. Standard
Roger's plain-English version: the Limited is for smaller, nonstructural work. If anything structural is involved, it has to be a Standard. HUD's Handbook 4000.1 (last revised August 12, 2026) says the same thing in more detail.
| Feature | 203(k) Limited | 203(k) Standard |
|---|---|---|
| Repair budget | Up to $75,000 in total rehabilitation costs | Minimum $5,000 in eligible improvements; total loan within FHA limits for the county |
| Structural work | Not allowed | Allowed |
| 203(k) consultant | Optional | Required |
| Time out of the home | No more than 30 days in total during the work | Up to 12 months of mortgage payments can be financed while the home can't be occupied |
| Who it fits | Roof, paint, flooring, kitchen, bath, systems | Foundations, additions, gut remodels, major repairs |
What counts as "major" under the Limited
HUD lists the conditions that push a job out of the Limited program. Work that is expected to take more than nine months, needs plans or architectural exhibits, needs a consultant to write up the repairs, or keeps you out of the house for more than 30 days in total is major. That goes to a Standard.
The new $75,000 cap
The Limited cap went from $35,000 to $75,000 under HUD Mortgagee Letter 2024-13, for FHA case numbers assigned on or after November 4, 2024. HUD says it will review the cap each year alongside its nationwide loan limits; as of the current handbook, it's still $75,000.
Source: HUD Mortgagee Letter 2024-13 and HUD Handbook 4000.1 (last revised August 12, 2026).
See the numbers
| Item | Value |
|---|---|
| Previous cap | $35,000 |
| Current cap | $75,000 |
Roger's view is that the old cap was simply too small for our price points. With $35,000, you couldn't get much done, and he saw agents and lenders try to stretch it by leaving out repairs the property actually needed to meet HUD's standards. At $75,000, a new roof, exterior paint and a kitchen can fit in one Limited loan.
What a 203(k) Consultant Actually Does
On a Standard 203(k), a consultant is required. Roger described the role as your big brother, your superintendent, your psychiatrist and your marriage counselor for the length of the rehab. In practice, the consultant inspects the house against HUD's minimum property standards, writes up what has to be done, and blends that list with the buyer's wish list into a work write-up that goes to the appraiser.
When a consultant gets used on smaller loans
The Limited doesn't require one under HUD's rules. Roger said some lenders require a consultant anyway as an overlay, whether the renovation is $65,000 or $250,000, and some require one on Fannie Mae, Freddie Mac and VA renovation loans too. Others don't. Ask your lender early, because it changes your fees and your timeline. Since the 2024 changes, consultant fees can also be financed on a Limited 203(k).
How long the process takes
The order of operations: feasibility inspection, work write-up, contractor bids, appraisal, closing, then draws as the work gets done, and a final inspection. Roger said getting from contract to closing, where you own the house and work can start, usually takes 45 to 60 days, depending on the lender. That's his experience, not a HUD timeline, and it's longer than a standard purchase. Build it into your move date.
Where You Live While the Work Gets Done
This is the question every relocating buyer asks, especially with a report date. In the video, Roger said the Standard 203(k) lets you roll six months of mortgage payments into the loan so you can rent elsewhere while your mortgage is covered.
The current rule is more generous than that. Since the 2024 changes, HUD's handbook lets the lender establish a financeable mortgage payment reserve of up to 12 months on a Standard 203(k), limited to the period when the property can't be occupied and to the completion timeline in the rehabilitation loan agreement. Six months was the older limit. Your lender sets the actual number based on your write-up.
On a Limited, there's no payment reserve to lean on, and the work can't keep you out for more than 30 days in total. Plan to live in the house or stay nearby.
Roger has seen people live on site in tents, campers and just about everywhere else in 36 years. If you're on military orders, my post on PCS moves to Naval Base Kitsap covers the rent-versus-buy side of a short timeline.
Finding a Contractor When You Don't Know Anyone Here
New to the area means no contractor list. Roger has a core group of contractors he's worked with who understand the renovation process, know how draws get paid, and are approved by most lenders. A good consultant or agent can make those introductions.
How to check a contractor yourself
Start with Washington L&I. Its contractor lookup shows whether a contractor is registered, along with complaints and judgments, and Roger called that a real advantage of buying here. Then ask how long they've been a general contractor. Roger's experience is that a lot of lenders won't approve a general contractor with less than five years in the trade. That's a common lender overlay, not a HUD rule, so ask your lender for its contractor requirements before you collect bids.
Red flags
Roger said the red flags on a job site are easier for an inspector to spot than for a buyer. The short version from him: be careful with contractors who have only been general contractors for two or three years, and verify everything on L&I before you sign.
FHA 203(k) vs. Fannie Mae HomeStyle
Roger's summary is that both are built for the same kinds of houses and serve different borrowers. HomeStyle is a conventional loan, so credit score requirements run a bit higher. FHA allows lower scores. In exchange, HomeStyle (and Freddie Mac's renovation loan, per Roger) gives more latitude on what has to be repaired, because HUD's minimum property standards are stricter.
| Feature | FHA 203(k) | Fannie Mae HomeStyle Renovation |
|---|---|---|
| Loan type | FHA-insured | Conventional |
| Repair limit | Limited: $75,000. Standard: within the county FHA loan limit | 75% of the lesser of price plus renovation costs, or the as-completed value (purchase) |
| Manufactured homes | Possible, depending on the lender, per Roger | Allowed for nonstructural work; renovation costs capped at 50% of as-completed value |
| Occupancy | Principal residence | Principal residence, one-unit second home or one-unit investment property |
| Payments while you can't live there | Standard: up to 12 months financeable | Up to six months of payments (PITIA) on a principal residence |
| Property standards | HUD minimum property standards | Fannie Mae's appraisal and property requirements |
I checked the HomeStyle terms against Fannie Mae Selling Guide B5-3.2-02 (dated December 10, 2025, in the guide published November 4, 2026). Lenders add overlays to both programs, so the loan officer's written terms are what you plan around.
Rehab loans on manufactured homes
Yes, you can use a rehab loan on a manufactured home, Roger said, but it depends heavily on the lender. Many lenders won't do manufactured homes at all, and many won't allow structural work on one. Fannie Mae's guide backs up the structural limit for HomeStyle: renovations must be nonstructural, with no added garage or other attached element.
Pair this with the rules from Part 1 on Washington manufactured homes. Any alteration to the home itself still needs an L&I permit, and the foundation certification still applies.
What FHA Appraisers Flag in Western Washington
Roger's answer surprised me even after years of doing this. The most common FHA appraisal flag he sees is flaking paint. The house can be leaning 14 degrees to the northwest, he joked, and the appraiser is worried about the paint. It even happens on fences.
Defective paint
HUD's rule depends on the build date. For a dwelling or related improvements built in 1978 or later, the appraiser must report all defective exterior paint and require repair of any defective paint that exposes the surface underneath to the elements. Stained or pressure-treated wood meant to weather doesn't need repair. For homes built before 1978, HUD's lead-based paint rules apply instead, and those are stricter. In my experience, paint fails fast on the south and west sides of a house, so look before you write the offer.
Roof certifications
A lender usually asks for a roof certification when the appraiser calls the roof out: moss or vegetation on top, debris, or a roof the appraiser couldn't properly see. HUD's handbook says the roof must have at least two years of remaining physical life, and if the appraiser reports less than that, the appraisal is made subject to inspection by a professional roofer. Roger said the certification covers the roof covering against ASTM standards. In wet, shaded parts of Kitsap and Mason, I'd budget for a roof inspection on any older roof before the appraisal is even ordered.
VA's New Appraisal Rules, Explained
On February 27, 2026, VA issued Change 46 to its Lender's Handbook (VA Pamphlet 26-7). It removed five minimum property requirements that VA called superfluous, effective for all VA appraisals ordered after May 1, 2026.
| Chapter 12 topic | What changed |
|---|---|
| Topic 1: Detached improvements and SAH jurisdiction | Removed |
| Topic 23: Non-vented heaters | Removed |
| Topic 32: Properties built in 1978 or later | Condensed |
| Topic 32: Properties built before 1978 | The phrase "or related improvements" removed |
| Topic 34: Radon gas | Removed in its entirety |
VA said in June 2026 that these were long-standing topics that often added delays or costs, and that the average VA appraisal was taking about seven business days as of May 31.
What this means for VA buyers here
Roger's reaction was that VA should have done it long ago. In Southeast Pierce County, Mason County and parts of Kitsap, it's normal to have a dozen outbuildings: sheds, a shop, a loafing shed, a barn. Under the old rules, all of them had to meet minimum property standards. He thinks FHA will follow, but that hasn't happened yet, so FHA appraisals still look at those structures.
Can a VA appraiser still flag a shed that's a real safety hazard? Roger's answer was yes and no, because it still isn't black and white. My advice: if an outbuilding is genuinely unsafe, expect it to come up, and fix or disclose it either way.
Radon is now on you
Removing the radon topic means a VA appraisal doesn't address radon at all. It doesn't mean radon went away. If you want to know, order your own test during the inspection period.
Wells and Septic If You're Coming From City Utilities
A lot of relocation buyers have never owned a well or a septic system. Out here, both are common on homes with land, and both affect the loan.
Well water
HUD's handbook says that when a home has a private well, the lender must make sure the water quality meets the requirements of the health authority with jurisdiction, or EPA drinking water standards where there are none. FHA requires a test for, among others, new construction, a well the appraiser reports problems with, water known or reported to be unsafe, and homes near dumps, landfills, industrial sites or farms. A disinterested third party has to collect and test the sample; the buyer and seller can't. Roger said in practice FHA and VA loans get water testing: bacteria (coliform and E. coli), plus nitrites and nitrates, which he said are rarely a problem in Western Washington. If a well comes back positive for coliform, the usual fix is to shock it with chlorine and retest.
HUD also sets minimum distances for existing wells: 10 feet from the property line, 50 feet from a septic tank and 100 feet from a drainfield, with local rules prevailing where they're stricter.
Septic
Roger's rule of thumb is to pump about every five years, keep grease and butter out of the drain, and use the right detergent. The state sets the inspection schedule: WAC 246-272A-0270 requires an inspection at least once every three years for a system that is just a tank and a gravity drainfield, and annually for all other systems, unless the local health officer requires more. Roger called the alternative systems very temperamental, and I agree.
Each county also has its own septic paperwork at sale. My post on selling a house with a septic system in Washington covers Kitsap, Pierce and Mason, and my list of hidden costs to check before you close covers the buyer side.
Roger's Rapid-Fire Advice
We ended with quick answers, and a few are worth keeping:
- Biggest myth newcomers believe: that it rains all the time.
- Never buy without seeing it: a house, in person or at least on a live video walkthrough.
- Seller pre-inspection: yes.
- The one question to ask your inspector: how long have you been doing this?
If you're buying from out of state, my 90-day checklist for moving to Washington shows where the inspection, appraisal and loan steps fall.
How Much Can You Borrow for Repairs With an FHA 203(k) Limited Loan?
Up to $75,000 in total rehabilitation costs, for nonstructural work only. The cap rose from $35,000 under HUD Mortgagee Letter 2024-13 for FHA case numbers assigned on or after November 4, 2024, and HUD reviews it each year. Structural work, or anything that keeps you out of the home more than 30 days, requires a Standard 203(k).
Do You Need a 203(k) Consultant?
On a Standard 203(k), yes: HUD requires an FHA-approved 203(k) consultant from its roster. On a Limited 203(k), HUD doesn't require one, but some lenders do as an overlay. Since the 2024 changes, consultant fees can be financed on a Limited 203(k). Ask your lender which applies before you make an offer.
Does a VA Appraisal Still Check Sheds and Outbuildings?
Not under the detached improvements rule anymore. VA's Change 46 removed that minimum property requirement for VA appraisals ordered after May 1, 2026, along with the non-vented heater rule and the radon topic. An appraiser may still raise a genuine safety hazard, so fix or disclose anything unsafe.
Does FHA Require a Well Water Test in Washington?
FHA requires the water to meet the local health authority's standards, and HUD's handbook requires a test for new construction, wells the appraiser reports problems with, water known to be unsafe, and homes near possible contamination sources. In Roger's experience, FHA and VA loans usually get one. A disinterested third party must collect and test the sample.
Final Thoughts
The house that needs work is often the one with the land and the location you actually want. FHA, VA and conventional renovation loans can get you there with one mortgage, as long as you pick the right program before you write the offer and give the process the extra weeks it needs.
The practical order: decide between Limited, Standard and HomeStyle with your lender, get a consultant or inspector who knows these files, check your contractor on L&I, and walk the exterior paint, roof, well and septic with the appraisal in mind. VA buyers just got a little more room on outbuildings and radon. Use it, but test for radon anyway.
This post is for information only and is not legal, tax or financial advice. The FHA rules cited are from HUD Handbook 4000.1 (last revised August 12, 2026) and Mortgagee Letter 2024-13, the VA changes are from the Change 46 transmittal to VA Pamphlet 26-7 (February 27, 2026), the HomeStyle terms are from Fannie Mae Selling Guide B5-3.2-02 (December 10, 2025), and the septic schedule is from WAC 246-272A-0270, all as of November 12, 2026. Lender overlays vary and rules change. Confirm with your lender, HUD, VA, the local health authority and a licensed professional before relying on them.
Buying a fixer from out of state
Send me your timeline. I'll help you line up a renovation lender, a 203(k) consultant or inspector like Roger, and your L&I homework before you write the offer, even if you're still 2,000 miles away. Start with the Moving to Washington guide, try Find Your Town if you haven't picked an area, or get in touch directly and call me at (360) 777-7212. When you're ready to look, search homes across Kitsap, Pierce, and Mason counties.
James Bergstrom, Founder/Broker, Paramount Real Estate Group. 25+ years, 1,000+ homes sold, and buyers who close at 95.48% of list price on average.
