Limited 203(k) Loans
These loans cover both the acquisition and specific repair costs up to the maximum amount allowed by FHA limits. The total repair cost may not exceed $35,000 and must be cosmetic only.
Home Renovation Loans
Renovation loans help qualified borrowers purchase or refinance — and renovate — with a single loan.
What is a home renovation loan?
The U.S. Department of Housing and Urban Development (HUD) section 203(k) program and Fannie Mae’s HomeStyle Renovation loans help qualified borrowers purchase or refinance — and renovate — with a single loan. These types of loans are not used to construct brand new homes, but to update and renovate an existing home. These programs create more flexibility in the transaction by basing the loan scenario on the property’s future value once the renovation is complete.
What is a 203(k) home renovation loan?
203(k) home renovation loans are insured by the Federal Housing Authority (FHA) and allow you to finance the cost of the home, plus any needed improvements. Examples of acceptable project types include:
- Flooring upgrades
- Kitchen and bath remodels
- Room additions
- In-ground pool repair
- Installation of energy-efficient windows
- Roof and gutter repair and replacement
What is Fannie Mae's HomeStyle Loan?
HomeStyle is a conventional loan, and it allows you to fund renovations up to 75% of the value of the home after renovations are complete. You can finance the same types of projects as a 203(k) loan, in addition to luxury items (such as swimming pools and tennis courts).
Standard 203(k) Loans
These loans cover both the acquisition and repairs, including structural changes and additions, up to the maximum allowed by FHA limits. The total repair cost may exceed $35,000.
HomeStyle Loans
These conventional loans cover both acquisition and repairs, including structural changes, additions, and more, up to 75% of the as-completed value of the home. You may not need mortgage insurance if your down payment is large enough.
Why get a renovation loan?
Because a renovation loan gives you the opportunity to purchase and renovate with a single loan, you’ll enjoy one mortgage, one closing, and one monthly payment. A down payment is required, and keep in mind that you may have to carry mortgage insurance (i.e. the HomeStyle program requiresprivate mortgage insurance for loan-to-value transactions exceeding 80%, while the 203K program will require mortgage insurance regardless of the loan-to-value). You can also make immediate improvements to your home without exhausting your savings or maxing out your credit cards to cover the necessary work. And like any other mortgage, the interest on your loan is tax-deductible.
Who is eligible for a 203(k) loan?
Because the federal government insures 203(k) renovation loans, lenders assume less risk in the event of a default and can be more lenient with eligibility criteria compared to some other loan types. This flexibility makes it easier for borrowers with lower credit scores and down payments to qualify.
Who is eligible for a HomeStyle Loan?
To qualify for Fannie Mae’s HomeStyle loan, the property can be your primary residence, second home or investment. The HomeStyle loan is a good choice for borrowers who have a higher credit score, extra money saved for a down payment, and qualify for a conventional mortgage.
Start your home renovation journey
We have the experts who work with you to ensure the process is as clear and simple as possible. Reach out today to move one step closer to your dream home!
Our company is not endorsed by, nor acting on behalf of or at the direction of the U.S. Department of Housing and Urban Development, Federal Housing Administration, U.S. Department of Agriculture, Veterans Administration or the Federal Government.