Written and reviewed by Jack Gladden, Senior Loan Officer, NMLS #1470164
Updated · 4-minute read · How these guides are written
Renovation loans in brief
- What they are
- One mortgage that pays for the home and the repairs, so you don’t need a separate construction loan or cash.
- FHA 203(k)
- Limited: up to $75,000 of repairs. Standard: larger projects with a HUD consultant. Both within FHA’s county limits.
- Fannie Mae HomeStyle
- Renovation costs up to 75% of the lower of price plus renovation or the as-completed value; luxury upgrades allowed.
- How it’s paid
- Repair money sits in escrow and is released to the contractor in draws as work is completed and inspected.
- Who it’s for
- Buyers of fixer-uppers and owners who want to renovate, mostly for a home they’ll live in.
- Refinance too
- You can also refinance and renovate the home you already own.
203(k) or HomeStyle?
| FHA Limited 203(k) | FHA Standard 203(k) | Fannie Mae HomeStyle | |
|---|---|---|---|
| Repair budget | Up to $75,000 | Larger projects, at least $5,000 | Up to 75% of the lower of price plus renovation or as-completed value |
| Consultant | Not required | HUD 203(k) consultant required | Not required |
| Structural work | No | Yes | Yes |
| Luxury items | No | No (no pools, for example) | Allowed |
| Who can use it | Owner-occupants | Owner-occupants | Primary homes, second homes and rentals |
| Credit and down payment | FHA rules: from 3.5% down | FHA rules: from 3.5% down | Conventional rules: up to 97% financing for eligible buyers |
Veterans can also look at VA renovation options, and Freddie Mac offers a similar program called CHOICERenovation. For a house that needs too much work for these, see rehab and code-case loans or construction loans.
Have a fixer-upper in mind?
Send me the address, the price and your contractor’s bid, or a rough idea of the work. I’ll tell you which program fits and how much you can finance.
How a renovation loan works.
Bids and plans
Your contractor prepares a detailed bid; for a Standard 203(k), a HUD consultant writes up the work and cost.
Appraisal of the finished home
The appraiser values the home as it will be after the work, which sets how much you can borrow.
Closing
The loan pays the seller (or your old mortgage), and the repair funds go into an escrow account, often with a contingency reserve.
Draws
As each phase is finished and inspected, the lender releases payment to the contractor until the work is done.
If you can’t live in the home during the work, some programs let you finance up to six months of mortgage payments.
Rules to know before you start.
- Contractors
- Usually licensed contractors approved by the lender. HomeStyle allows do-it-yourself work on one-unit homes, up to 10% of the as-completed value.
- Property types
- 203(k) covers 1–4 units, eligible condos (interior work), townhomes and some manufactured homes; HomeStyle caps renovation funds at 50% of value for manufactured homes.
- Permits
- Your contractor pulls the permits before work starts.
- Timeline
- Lenders set a deadline to finish the work, so choose a contractor who can keep to it.
The catch.
- More paperwork and time. Bids, inspections and draws add steps, so closing can take longer than a standard purchase.
- Contractor dependence. Delays or cost overruns affect your loan; the contingency reserve helps, but choose carefully.
- Limits on what you can do. 203(k) loans exclude luxury items; HomeStyle has its own caps.
- Owner-occupants only, for 203(k). Investors and house flippers need other financing.
How we get started.
Tell me the project
The home, the work you want and any bids you have.
I match the program
203(k), HomeStyle or another option, with how much you can finance.
Line up the team
Your contractor, and a consultant if needed, prepare the bid and plans.
Close and renovate
Then draws as the work is completed.
Renovation loans, answered plainly.
How hard is it to get an FHA 203(k) loan?
If you qualify for an FHA loan, a 203(k) adds steps rather than tougher credit: bids, inspections and, for larger projects, a HUD consultant.
What are the requirements for an FHA 203(k) loan?
FHA’s usual credit and down payment rules, a home you’ll live in, at least $5,000 of work for a Standard 203(k), and a total loan within the county limit.
What is a HomeStyle renovation loan?
Fannie Mae’s conventional renovation loan: it finances the purchase or refinance plus renovation costs, for primary homes, second homes and rentals, and allows luxury upgrades.
What are the loan limits for a HomeStyle renovation loan?
The total loan follows your county’s conforming limit: $832,750 for one unit in most counties in 2026, up to $1,249,125 in high-cost ones. Renovation costs can be up to 75% of the lower of the price plus renovation or the as-completed value.
What are the downsides of a 203(k) loan?
More paperwork and time, limits on the type of work, FHA mortgage insurance, and the need to work with an approved contractor and, for larger jobs, a consultant.
Can you flip a house with a 203(k) loan?
No. 203(k) loans are for owner-occupants. Investors look at rehab loans or bridge loans.
Can I do the work myself?
With HomeStyle, on a one-unit home, for up to 10% of the as-completed value. 203(k) loans generally require contractors. See also: FHA 203(k) vs HomeStyle renovation loans.
What credit score do I need for a renovation loan?
For a 203(k), FHA’s rules apply, though many lenders set a higher minimum of their own because of the extra work involved. HomeStyle follows conventional credit rules, typically 620 or higher.
What is the 30% rule in remodeling?
A rule of thumb, not a lending rule: avoid spending more than about 30% of the home’s value on one renovation, so you don’t over-improve for the neighborhood. Lenders apply their own limit through the as-completed appraisal.
What are the requirements for a Fannie Mae HomeStyle renovation loan?
Conventional standards for credit, income and debts, plus a contractor’s bid and a renovation plan the lender approves; the loan is based on the home’s value after the work. It can be used for a home you live in, a second home or a one-unit investment property.
Is it hard to get approved for a renovation loan?
The borrower side is like a regular loan; the extra work is on the project: contractor bids, plans and an as-completed appraisal. A licensed contractor and a realistic budget make approval much smoother.
How many months of payments can be financed into a renovation loan?
Up to six months of payments (principal, interest, taxes and insurance) when you can’t live in the home during the work, with both a HomeStyle and an FHA 203(k) loan.
Rehab & code cases
Construction & bridge
Cash-out refinance
FHA