Renovation loans like FHA 203k and HomeStyle® Renovation are built for homes that need work. This guide walks through how these programs combine your purchase or refinance and renovation budget into one loan, how the numbers are structured, and what to expect from bids to final inspection.
Renovation loans are designed for people who see potential more than perfection. Instead of walking away from a home that needs work, you can use a structured program to finance repairs and improvements into the mortgage.
They may be a strong fit if you:
Renovation loans can be less ideal if you’re hoping to do a full DIY rehab, want a very loose project plan, or need funds for items that fall outside program rules (like many “luxury” add-ons).
Core idea
With renovation loans, you qualify based on the after-improved value of the property. Your loan amount can include:
Key mechanics
You don’t need to memorize all the rules. The goal is understanding the flow: plan the work, structure the budget, close once, then complete the project under a clear draw process.
FHA 203k is an FHA-backed renovation loan focused on owner-occupied homes. It comes in two main flavors:
It can be more forgiving on credit, but you’ll need to follow specific rules for contractor bids, inspections, and eligible work.
HomeStyle® Renovation is a conventional program that can offer more flexibility around property types and project scope for qualified borrowers. It’s commonly used for primary homes and, in some cases, second homes and investment properties that meet guidelines.
Down payment, mortgage insurance, and project rules differ from FHA. We’ll line them up side-by-side with your scenario so you can see which lane fits best.
The “right” program depends on your credit, down payment, property type, and project size. We’ll typically model both if you qualify, then compare payment, cash to close, and flexibility.
Renovation programs focus on homes that will be safe, sound, and livable once work is complete. Within that, there’s room for both essential repairs and value-adding improvements.
A good rule of thumb: if the work improves safety, function, or long-term value, there’s a good chance it’s worth exploring under renovation financing.
Building the budget
Cash to close
Renovation loans add moving parts, but they shouldn’t add confusion. The goal is a clear picture: purchase/payoff + renovation budget + costs, and what that means in both payment and equity.
Imagine a buyer finds a home listed at $420,000 that needs a new roof, updated kitchen, and some safety repairs. Contractor bids come in around $65,000 for the total project.
Instead of paying out-of-pocket or running multiple loans, we might structure:
Once the work is done and the dust settles, the homeowner has one mortgage, a home that fits their life, and a clear paper trail for the improvements that were made.
You don’t need a perfect plan before we talk. But these items help us move quickly and give you realistic renovation numbers:
From there, we can use real-world numbers—rates, guidelines, and your bids—to refine the all-in budget, payment, and equity picture.
As you compare options, these questions keep you grounded:
If you can answer those clearly, you’re not just “doing a project”—you’re stewarding a major investment with a plan.