Renovation Loans

Understanding the Power of Renovation Financing

Options include:

• Purchases
• Refinances
• Second Homes
• Investment Properties

Highlights Include:

• Choose your own contractor to complete the work (no self-help)
• Options for no house payments during renovation period
• Conventional and FHA Renovation Programs

Eligible Renovations

Examples of what can be done with a renovation loan (depending on program guidelines):

Structural

• Add on to the house
• Repair structural damage
• Build a new garage
• Finish a basement

Livability

• New furnace or air conditioning
• New septic system
• New plumbing
• New electrical
• Replace or repair roof
• Repair or replace well
• New driveway or walkways
• Fencing

Luxury

• Kitchen renovations
• Bathroom renovations
• New flooring
• New appliances
• Swimming pool installation

Health & Safety

• Accessibility improvements
• Eliminating health and safety hazards

Disaster preparedness (repair or resiliency improvements)

• Storm and wind protection such as impact-resistant windows and roof tie-downs
• Flood and water damage prevention
• Fire and wildfire mitigation
• Power and utility resilience
• Structural and safety improvements
• General preparedness upgrades like water storage and emergency lighting

What is a 203(k)?

The FHA 203(k) loan is designed for homes needing repairs or improvements. It allows you to combine the purchase price and the cost of improvements into a single mortgage.

• Finance home purchase and renovation together
• Customize and improve the home to meet your needs
• Credit requirements may be more flexible than conventional loans
• Can be obtained with as little as 3.5% down

Limited FHA 203(k)

• No minimum repair amount
• Non-structural repairs up to $75,000
• 1 to 4 units allowed
• Owner-occupied only
• 3.5% down payment
• Minimum 640 FICO
• No HUD consultant required

Standard FHA 203(k)

• Minimum $5,000 in repairs
• Allows structural and non-structural repairs within FHA limits
• 1 to 4 units allowed
• Owner-occupied only
• 3.5% down payment
• Minimum 640 FICO
• HUD consultant required

HomeStyle^® Renovation

• No minimum repair cost
• Improvements allowed up to 75% of after-improved value
• 1 to 4 units (primary, second home, investment)
• Minimum 3% down payment
• Minimum 620 FICO

*A minimum 10% contingency reserve is required to cover unforeseen issues during renovation. Any unused funds are credited back to reduce the loan principal.

Freddie Mac CHOICERenovation^®

CHOICERenovation allows lenders to deliver loans to Freddie Mac where the borrower uses the loan proceeds to pay for the renovations.

• 1-4-unit primary residence
• Manufactured homes
• 1-unit second homes
• 1-unit investment property
• Units located in planned unit developments (PUDs), condominiums, cooperatives (if permitted under the Seller’s Purchase Documents) or leasehold estates are acceptablexxx

Refinancing Your Renovations

You can refinance your current mortgage into a renovation loan to improve your home and roll remodeling expenses into one loan. Available renovation refinance loan types include:

• Fannie Mae HomeStyle^®
• Limited FHA 203(k)
• Standard FHA 203(k)

The Home Renovation Process

1. Define Your Goals – Identify what improvements you want and why.
2. Budget Your Renovation – Get contractor estimates and include contingency funds.
3. Apply for a Home Improvement Loan – The application process is similar to a mortgage.
4. Close the Loan and Complete Repairs

Renovation FAQs

How much can I borrow?
Your loan amount depends on the appraised value after improvements.

What repairs are allowed?
Most interior, exterior, structural, and functional repairs depending on program guidelines.

Can I do the work myself?
No, work must be done by a licensed and insured contractor.

Can a family member do the work?
Yes, if they are licensed and insured.