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Renovation Loans

If you’re looking for a fixer-upper but you aren’t sure how to finance the renovations, a renovation loan might be your solution! This type of mortgage lets you roll renovation costs into your home loan.

What is a Renovation Loan?

For home buyers who want to buy or refinance a house that could use some work, a renovation loan offers the option to include the renovation costs in the mortgage. If you’re buying a new home, this type of mortgage includes the purchase price and the improvements, then your renovation costs are included as a portion of your monthly house payment. Many people find that it’s less expensive to use a renovation loan than financing renovations with a personal loan or credit card.

FHA 203K

Renovation loans insured by the Federal Housing Administration are referred to as FHA 203k loans. FHA 203k loans are designed to provide a more affordable way to cover the cost of home renovations. Since this type of mortgage is guaranteed by the FHA, it may offer more flexible requirements.

There are two options for FHA 203k loans: standard and limited. Both options have varying guidelines about your maximum borrowing cost for renovations and what type of renovations are eligible.

  • FHA 203k Standard: The renovation cost can exceed $35,000 and can include major structural repairs. If a borrower chooses a 203k Standard, they must work with a HUD consultant to manage the renovations.
  • FHA 203k Limited: Renovation costs not including major structural repairs up to $35,000 are eligible.

Fannie Mae HomeStyle

Fannie Mae HomeStyle loans also allow borrowers to roll the cost of their renovations and the home together. HomeStyle loans can offer more flexibility on the eligible types of improvements and renovations, so it’s very appealing to many borrowers. A HomeStyle loan is a conventional renovation loan that allows borrowers to make a down payment as low as 3% and the loan amount is based on the house’s estimated value after the renovation.

Our company is not endorsed by, nor acting on behalf of or at the direction of the U.S. Department of Housing and Urban Development, Federal Housing Administration, U.S. Department of Agriculture, Veterans Administration or the Federal Government.