Renovation

A renovation loan is a type of mortgage that allows homebuyers to finance both the purchase price of a home and the cost of renovations in a single loan. It can also be used by existing homeowners to refinance and fund home improvements. These loans are especially useful for buyers looking at fixer-uppers or properties that need repairs or upgrades.

How a Renovation Loan Can Help Home Buyers:

  1. Finances Both Purchase & Repairs in One Loan – Instead of taking out a separate loan for renovations, buyers can roll the costs into their mortgage, simplifying financing.

  2. Low Down Payment Options – Many renovation loan programs allow for low down payments (as low as 3-5%), making homeownership more accessible.

  3. Increase Home Value – Buyers can boost the home's value by making improvements, which can lead to higher resale value and equity growth.

  4. Customize the Home to Your Needs – Buyers can purchase an older or outdated home and renovate it to match their style and preferences.

  5. Competitive Interest Rates – Since renovation loans are part of a mortgage, they typically have lower interest rates than personal loans or credit cards used for home improvements.

  6. Faster Move-In for Fixer-Uppers – Renovation loans provide upfront funding for repairs, allowing work to start immediately after closing, instead of waiting to save up cash.

Types of Renovation Loans:

  1. FHA 203(k) Loan – Backed by the FHA, this loan is ideal for buyers with lower credit scores and smaller down payments. It comes in two versions:

    • Limited 203(k) – For minor repairs up to $35,000.

    • Standard 203(k) – For major renovations requiring a minimum of $5,000 in repairs.

  2. Conventional HomeStyle Loan (Fannie Mae) – A flexible renovation loan for a wide range of home improvements, including luxury upgrades like pools. Requires higher credit scores than FHA 203(k).

  3. CHOICERenovation Loan (Freddie Mac) – Similar to HomeStyle but allows financing for resilience improvements (e.g., flood prevention, solar panels).

  4. VA Renovation Loan – For eligible veterans and service members, this VA-backed loan helps finance home repairs with 0% down.