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Renovation Loan Programs

Learn About FHA 203(k) & Conventional Renovation Financing

Whether you're buying a fixer-upper or planning to renovate your current home, renovation financing may allow eligible borrowers to include the cost of improvements as part of their mortgage.

This guide explains two of the most common renovation loan programs—FHA 203(k) and Conventional Renovation Loans—so you can better understand how they work and which option may best fit your goals.

Mortgage Rate Snap is an educational platform that helps consumers understand mortgage programs and connects them with licensed mortgage professionals who can review available financing options based on their individual situation.

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💡 What Is Renovation Financing?

Renovation financing is designed to help eligible homebuyers and homeowners finance both a home and qualifying improvements through a single mortgage.

Depending on the loan program, eligible borrowers may be able to:

  • Purchase a home and finance approved renovations
  • Refinance an existing mortgage while funding home improvements
  • Complete repairs, upgrades, or remodeling projects
  • Roll eligible renovation costs into one mortgage payment

Common renovation projects include:

  • Kitchen remodels
  • Bathroom renovations
  • Roof replacement
  • Flooring upgrades
  • HVAC replacement
  • Plumbing and electrical improvements
  • Room additions
  • Structural repairs
  • Energy-efficient upgrades

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🏛 FHA 203(k) Renovation Loan

What Is an FHA 203(k) Loan?

The FHA 203(k) loan is a government-insured mortgage program that may allow eligible borrowers to finance both the purchase or refinance of a home and approved renovation costs within the same mortgage.

It is commonly used when purchasing a home that needs repairs or updating an existing property.

How an FHA 203(k) Loan Works

Eligible borrowers may be able to:

  • Purchase or refinance a home
  • Include approved renovation costs in the mortgage
  • Finance qualifying repairs and improvements
  • Complete renovations through a structured funding process

Renovation funds are generally distributed as work is completed and approved.

Limited FHA 203(k)

The Limited FHA 203(k) is generally intended for smaller, non-structural improvement projects.

Common uses include:

  • Interior painting
  • Flooring replacement
  • Kitchen and bathroom updates
  • Appliance replacement
  • Minor home repairs

Standard FHA 203(k)

The Standard FHA 203(k) is designed for larger renovation projects and structural improvements.

Common projects include:

  • Roof replacement
  • Structural repairs
  • Plumbing upgrades
  • Electrical improvements
  • Room additions
  • Major home rehabilitation

These projects typically require contractor estimates and additional documentation.

Potential Benefits of an FHA 203(k)

  • Government-insured mortgage program
  • Lower down payment options may be available for eligible borrowers
  • Flexible qualification guidelines compared to some conventional financing
  • One mortgage for both the home and approved renovations

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Conventional Renovation Loans

Conventional renovation loans allow eligible borrowers to finance home improvements through a conventional mortgage program backed by Fannie Mae or Freddie Mac.

These programs may be available for qualifying primary residences and, in some situations, second homes or investment properties.

Fannie Mae HomeStyle® Renovation

The HomeStyle Renovation loan offers flexibility for a wide variety of renovation projects.

Common improvements include:

  • Kitchen remodeling
  • Bathroom renovations
  • HVAC replacement
  • Roofing
  • Flooring
  • Room additions
  • Landscaping
  • Energy-efficient improvements

Depending on program guidelines, the property's completed value may be considered during the financing process.

Freddie Mac CHOICERenovation®

The CHOICERenovation program is designed for both minor updates and major renovations.

Eligible projects may include:

  • Home modernization
  • Structural repairs
  • HVAC, plumbing, and electrical upgrades
  • Disaster resiliency improvements
  • Energy-efficient upgrades
  • Major renovation projects

Potential Benefits of Conventional Renovation Loans

  • Wide variety of eligible improvement projects
  • Flexible renovation options
  • Competitive financing for qualified borrowers
  • May support higher loan amounts depending on borrower qualifications and program guidelines

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FHA 203(k) vs. Conventional Renovation Loans

Feature FHA 203(k) Conventional Renovation
Loan Type Government-insured Conventional mortgage
Credit Guidelines Generally more flexible Typically more credit-sensitive
Property Types Primary residence Primary residence and, in some cases, second homes or investment properties
Renovation Options Limited and Standard programs Broad range of eligible improvements
Project Process Structured renovation oversight Varies by program and lender

When Renovation Financing May Make Sense

Renovation financing may be worth exploring if you're planning to:

  • Purchase a fixer-upper
  • Renovate an older home
  • Update kitchens or bathrooms
  • Complete major repairs
  • Improve your home's functionality
  • Increase your property's value
  • Finance renovation costs through your mortgage

What Lenders Typically Review

Eligibility varies by lender and loan program, but mortgage professionals commonly review:

  • Credit history
  • Income and employment
  • Debt-to-income ratio
  • Available home equity (for refinances)
  • Property appraisal
  • Renovation plans
  • Contractor estimates
  • Program-specific requirements

Frequently Asked Questions

Can I buy a fixer-upper with a renovation loan?

In many cases, eligible borrowers may be able to purchase a home that needs repairs and finance approved renovations through certain loan programs.

Can renovation costs be included in my mortgage?

Some renovation loan programs allow eligible improvement costs to be financed as part of the mortgage, subject to lender approval and program guidelines.

Do I need a licensed contractor?

Many renovation loan programs require work to be completed by qualified contractors. Requirements vary by program and lender.

Which renovation loan is right for me?

The best option depends on your financial situation, the property, and the type of improvements you're planning.

Take the Next Step

If you're considering buying a fixer-upper or financing renovations to your current home, a licensed mortgage professional can help you understand which renovation programs may be available based on your goals and financial profile.

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Footer Disclosure

Mortgage Rate Snap is an educational platform that connects consumers with licensed mortgage professionals. We are not a lender, mortgage broker, or loan servicer, and we do not make credit decisions or guarantee loan approval. Loan terms, program availability, and eligibility are determined by participating licensed mortgage professionals and applicable underwriting guidelines.