A federal program for loans that allows homebuyers to buy fixer-upper properties has declined by 77 percent over the past decade, even as the nation’s aging housing stock makes renovation financing more critical, a report the Consumer Federation of America, or CFA, a consumer advocacy group, shows.
Using 2024 Home Mortgage Disclosure Act data and interviews, the report concludes that barriers, not lack of demand, are driving the program’s collapse.
The Federal Housing Administration’s, or FHA, primary renovation mortgage, the 203(k) loan, is failing to reach first-time homebuyers, is rarely used in rural communities, and faces high application failures, with more loans withdrawn, 41 percent, than are successful, 36 percent, according to the report. Borrowers also face: difficulty finding eligible properties, appraisal gaps in distressed markets, and reluctance among lenders and contractors to navigate the program’s complexity.
“Buying a fixer-upper has become out of reach for most first-time homebuyers, partly because of a lack of good mortgage options,” Sharon Cornelissen, director of housing at the CFA, said in a statement.
Cornelissen said the FHA renovation loan carries promise, but the Department of Housing and Urban Development, or HUD, needs to modernize the mortgage to make it workable for homebuyers.
The report finds that a nationwide shortage of HUD–approved consultants has made the program unavailable in many states.
While recent FHA updates increasing loan limits and extending repair timelines are positive steps, CFA is calling for broader reforms. They include expanding outreach, rebuilding the consultant workforce, especially in rural areas, linking home repair grants to 203(k) financing, and doing a pilot program to expand the HUD Mortgagor program to better support nonprofit-led rehabilitation. The HUD Mortgagor program allows non-profit groups and governmental entities to take out FHA renovation loans, fix up properties, and let borrowers “assume” FHA loans on updated homes.
For details, see “A Loan Program in Need of Repairs: The Unmet Promise of FHA 203(k) Renovation Loans.”
