home renovationRenovating a home can be a worthwhile investment. Whether you want more space, new amenities or updated finishes, a renovation can deliver it. While a home improvement project can come with a big price tag, renovation loans are available to help finance the work and make your dream home a reality.

Renovation loans are a special type of mortgage for financing home improvements. Unlike traditional mortgages, which aren’t available for amounts above a home’s current value, renovation loans are based on the post-renovation value of a home. They can be used to purchase and renovate a new home or to renovate a currently owned home. Qualifying renovation work typically includes most improvements or repairs that are permanently affixed to and add value to a home.

The two most popular type of renovation loans are FHA 203(k) and Fannie Mae HomeStyle® loans.

FHA 203(k)

Of the two major renovation loan types, 203(k) loans generally have more restrictions but are available to more people. 203(k) loans have lower minimum credit score requirements compared to HomeStyle® loans, and for homebuyers, they also only require a down payment as low as 3.5%. These loans can only be used for primary residences, and they have a loan amount limit that varies by county and property type. A renovation project using a 203(k) loan must be completed within six months.

Fannie Mae HomeStyle®

HomeStyle® renovation loans can provide more flexibility than 203(k) loans. They offer higher loan amount limits, fewer restrictions on renovation work (including the ability to finance luxury improvements like in-ground swimming pools) and more time to complete a renovation project (12 months). They can also be used for second homes and investment properties. The minimum down payment for homebuyers using a HomeStyle® loan ranges between 3 and 15 percent.

Other options

If you currently own a home, you may also be able to finance a renovation using a more traditional mortgage refinance. This option is usually less complicated than a renovation loan, but it requires that you have sufficient equity (the value of your home minus the amount you owe on your mortgage). Refinance options such as a cash-out refinance, home equity line of credit (HELOC) or home equity loan allow you to access your home’s equity to spend on a renovation or anything else.


Which solution is right for you and your renovation plans will depend on your specific situation. To learn which options are available to you, how much financing you can obtain and what your payments may be, contact us for a free mortgage consultation.