Home Renovation Loans: What Are Your Options?

You want to buy a house that needs work. A regular mortgage won't cover the repairs. You need a renovation loan that bundles everything into one package.

FHA 203(k) — the classic fixer-upper loan

As covered earlier, this comes in Limited ($35k max) and Standard ($35k+). Low 3.5% down. Good for buyers with lower credit scores. Slower process, more paperwork.

Best for: Buyers with 580+ credit who want to put limited cash down and don't mind a slower closing.

Fannie Mae HomeStyle

A conventional renovation loan. 5% down minimum (or 3% for first-time buyers). More flexible than 203(k). Faster processing. No government involvement.

• Renovation costs up to 75% of the after-repair value.
• Can finance luxury upgrades (pools, solar, landscaping — where 203(k) can't).
• Allows DIY for some projects (if you're a licensed contractor or can prove capability).
• PMI drops off at 20% equity (unlike FHA MIP).

Best for: Borrowers with 620+ credit who want more flexibility and are willing to put up to 5% down.

Freddie Mac CHOICERenovation

Similar to HomeStyle. 5% down. Covers structural repairs, additions, and cosmetic updates. Can include fixtures and appliances.

Best for: Same as HomeStyle. Your lender will typically offer one or the other.

VA Renovation Loan

Veterans can combine a VA loan with renovation features. Zero down, no PMI. Only for vets and active duty. Requires VA approval of contractors and plans.

Best for: Military buyers who want to fix up a home with zero down.

What all renovation loans have in common

• One closing, one loan, one monthly payment for purchase + renovations.
• Loan amount is based on the after-repair value, not the purchase price.
• Contractors must be licensed, insured, and approved by the lender.
• Funds are held in escrow and paid to contractors as work is completed.
• You can't do the work yourself (DIY exception with HomeStyle in limited cases).

The takeaway: Renovation loans let you buy a fixer-upper and turn it into your dream home with one loan. HomeStyle is usually the smoothest experience, but 203(k) is best for lower-credit or low-down-payment buyers.