Renovation Loans

One-line summary: Mortgage loans that finance both the purchase (or refinance) and the renovation of a property in a single loan, useful for buying fixer-uppers or upgrading a current home without a second loan.

Best for

Homebuyers purchasing a property that needs work, from cosmetic updates to structural repairs, and existing homeowners planning major renovations who want to roll the renovation cost into the mortgage rather than financing it separately.

Key terms (typical)

Attribute	Typical Range
FHA 203(k)	Government-backed; standard and limited versions; primary residence only
Fannie Mae HomeStyle	Conventional; broader property and use eligibility (primary, second, investment)
Eligible projects	Structural repairs, system upgrades, additions, kitchens, baths, energy improvements
Loan amount	Based on after-improvement value, up to program limits
Down payment	FHA 203(k): 3.5%; HomeStyle: 3–5% (primary), higher for investment
Credit score	580–620+ baseline for FHA 203(k); 620+ standard minimum for Fannie Mae HomeStyle programs
Contractor requirements	Licensed contractor with detailed bids and project plan

Why borrowers choose this program

• One loan for purchase + renovation. Rolls everything into a single mortgage at the same rate, instead of using a higher-rate personal loan or HELOC for the renovation work.
• After-improvement value basis. The loan amount is based on what the property will be worth after the renovation, not what it’s worth now, meaningful when buying a property below its post-rehab potential.
• Make it your own. Buy a property in the right location and price range, then renovate to your preferences instead of competing for already-renovated homes.
• Two flavors to fit the project. 203(k) for FHA-eligible primary residence borrowers; HomeStyle for conventional borrowers and broader property types.

Considerations

• Renovation timeline. Most programs require renovation to complete within 6–12 months. Larger or more complex projects may need a different financing structure.
• Contractor approval. The lender will require licensed contractors with detailed bids; DIY work is generally not allowed for the loan-financed portion.
• Slower close. Renovation loan underwriting takes longer than standard purchase underwriting, expect 45–60 days minimum.
• Inspections during construction. Funds are released in draws tied to inspection milestones, similar to construction loans.