If you have limited cash on hand to make repairs or improvements, a renovation loan may be a smart move for you. They’re usually a more cost-efficient option compared to taking a separate, second loan. They can be profitable for homeowners by adding more value to the property in lots of different ways.
Renovation loans are rolled into your home purchase or refinance to help with repairs and/or improvements. The home purchase and renovation costs are bundled into a single monthly mortgage payment. Renovation loans aren’t just for major rehabilitation work. Bathroom remodeling, room additions, roofing, removing walls, energy efficiency improvements, and many more projects can be funded with the help of a renovation loan.Start Now
FHA 203(k) renovation loans follow the FHA’s borrower qualification guidelines. They’re perfect for first-time buyers wanting to add some value to their first home while still taking advantage of a low 3.5% down payment requirement.
Standard FHA 203(k)
Standard FHA 203(k) renovation loans can provide more than $35,000 for structural repairs and larger renovation projects. A standard FHA 203(k) can help with improvements like removing walls, pool repairs, large landscaping projects, and much more.
Limited FHA 203(k)
Limited FHA 203(k) renovation loans provide up to $35,000 to help make non-structural repairs or renovations to your home. These kinds of improvements might include updating a kitchen, adding new flooring, remodeling a bathroom, purchasing updated appliances, or repairing a roof, to name a few.
Homestyle Renovation Loan
Fannie Mae’s HomeStyle renovation loan is rolled into a conventional loan. Unlike FHA 203(k) loans, HomeStyle loans can be used on second homes and investment properties. There’s no minimum cost requirements or restrictions on the kind of repairs you can make under a HomeStyle renovation loan. However, any improvements or repairs must be completed by a licensed contractor, permanently affixed to the property, and contribute to the property value.