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What Is a Renovation Loan?
Renovation loans provide additional funds to cover renovations or large remodeling projects when you buy or refinance a home. The loan is combined with the mortgage or refinance loan so you have only one monthly payment.
How Does a Renovation Loan Work?
A renovation loan lets buyers take out max financing based on the “after improved” value of a home, or how much the house is estimated to be worth after the renovations are complete. That gives them more room in their budget.
We offer three types of renovation loans...
- HomeStyle Renovation loan
- FHA Limited 203(k) loan
- FHA Standard 203(k) loan
I will talk to you about your specific needs and goals and help you determine the right loan for you.
HomeStyle Renovation loan
The HomeStyle Renovation loan is similar to FHA loans, but it allows buyers to finance luxury items like swimming pools, detached garages, or gazebos in addition to basic renovations. It can be used for a primary residence, secondary residence, or investment property.
Like the FHA Standard 203(k) loan, the HomeStyle Renovation loan lets borrowers finance six months of mortgage payments if the house is uninhabitable during construction.
- HUD consultant may be required
- No minimum borrowing amount
- The maximum amount of repairs can’t exceed 75% of the “after improved” value
- Loan amount can’t exceed max county loan limit
- All work must be completed within 12 months
FHA Limited 203(k) loan
The FHA Limited 203(k) loan is a government-insured loan program that lends buyers up to $35,000 on top of their mortgage to make minor changes to an existing home.
This is a good option if you need funds for installing new appliances, repairing decks, upgrading roofs, and fixing things like drainage systems, HVAC systems, electrical systems, and plumbing.
- No structural repairs allowed
- No minimum repair amount
- The maximum repair amount can’t exceed $35,000
- All work must be completed within six months
FHA Standard 203(k) loan
The FHA Standard 203(k) loan provides renovation financing for homes that require major renovations, structural repairs, or other changes exceeding $35,000. It covers everything from minor rehabilitations to complete tear-downs.
As long as the foundation remains in place, a home can be demolished or razed as part of rehabilitation and still be eligible for a Standard FHA loan. If the house is uninhabitable during construction, borrowers can finance up to six months of mortgage payments.
- One general contractor required
- FHA-approved HUD consultant required
- $5,000 minimum repair amount
- No maximum amount other than the county loan limit
- No luxury items like pools or gazebos
- All work must be completed within six months
- The borrower must occupy the property as their primary residence within 30 days of the closing
Note: All Standard FHA 203(k) loans require a HUD-approved consultant to help navigate and oversee the construction process.
A renovation loan could be just what you need to turn your house into a home you’ll love. Let's meet to discuss your goals, finances, and ideas to help find the right financing for you.Customer Reviews
Find a House. Create a Home.
Low-interest loans specifically for home improvements are a great way to breathe new life into an older home. Instead of using your savings or a high-interest credit card, you can take advantage of these loans that are made specifically for home improvements.
FHA Limited 203(k) | FHA Standard 203(k) | HomeStyle Renovation Program |
Federally insured | Federally insured | Conventional loan |
Purchase or refinance – Expand purchase options | Purchase or refinance – Expand purchase options | Purchase or refinance – Expand purchase options |
Primary residence | Primary residence | Primary residence, 2nd home and investment properties |
Single-family homes, PUDs, Condo, 2-4 units and REO | Single-family homes, PUDs, Condo, 2-4 units and REO | Single-family homes, PUDs, Condo, 2-4 units and REO |
Minimum down payment – Gift funds are OK | Minimum down payment – Gift funds are OK | Minimum down payment |
Allowable improvements: kitchen & bath remodel, roof replacement, upgraded heating, plumbing, windows, doors and more (no luxury items or structural work) | Allowable improvements: Structural alternations and additions, kitchen and bath remodel, roof replacement and more (no luxury items) | Allowable improvements: indoor remodeling, outdoor building(s) and luxury items such as BBQ and swimming pool (must be built-in and add value) |
No minimum dollar amount in repairs | $5,000 repair minimum | No minimum dollar amount in repairs |
Work plan required, but work write-up is not required | Work write-up required | Work write-up is recommended, but not required |
Loan amount based on sales price, or as-is value + repair amount, OR 110% of the as-completed value, whichever is less | Loan amount based on sales price, or as-is value + repair amount, OR 110% of the as-completed value, whichever is less | Purchase loan amount based on the lesser of the sales price + cost of renovation or as-completed value. Refinance Loan amount based upon original loan amount divided by as-completed value |
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