Renovation Loan Basics

Updated: Mar 29

Are you interested in buying a fixer-upper or remodeling your current house to make it feel more like home? Security First Financial offers renovation loans that could help you make your goals a reality. Keep reading to learn about the basics of home renovation loans...

What Is a Renovation Loan?

Renovation loans provide additional funds to cover renovations or large remodeling projects when you buy or refinance a home. The loan is combined with the mortgage or refinance loan so you have only one monthly payment.

How Does a Renovation Loan Work?

A renovation loan lets buyers take out max financing based on the “after improved” value of a home, or how much the house is estimated to be worth after the renovations are complete. That gives them more room in their budget.

Renovation Loans at Security First Financial

We offer three types of renovation loans...

  • FHA Limited 203(k) loan

  • FHA Standard 203(k) loan

  • HomeStyle Renovation loan

Your Loan Officer will talk to you about your specific needs and goals and help you determine the right loan for you.

FHA Limited 203(k) loan

The FHA Limited 203(k) loan is a government-insured loan program that lends buyers up to $35,000 on top of their mortgage to make minor changes to an existing home.

This is a good option if you need funds for installing new appliances, repairing decks, upgrading roofs, and fixing things like drainage systems, HVAC systems, electrical systems, and plumbing.

  • No structural repairs allowed

  • No minimum repair amount

  • The maximum repair amount can’t exceed $35,000

  • All work must be completed within six months

FHA Standard 203(k) loan

The FHA Standard 203(k) loan provides renovation financing for homes that require major renovations, structural repairs, or other changes exceeding $35,000. It covers everything from minor rehabilitations to complete tear-downs.

As long as the foundation remains in place, a home can be demolished or razed as part of rehabilitation and still be eligible for a Standard FHA loan. If the house is uninhabitable during construction, borrowers can finance up to six months of mortgage payments.

  • One general contractor required

  • FHA-approved HUD consultant required

  • $5,000 minimum repair amount

  • No maximum amount other than the county loan limit

  • No luxury items like pools or gazebos

  • All work must be completed within six months

  • The borrower must occupy the property as their primary residence within 30 days of the closing

Note: All Standard FHA 203(k) loans require a HUD-approved consultant to help navigate and oversee the construction process.

HomeStyle Renovation loan

The HomeStyle Renovation loan is similar to FHA loans, but it allows buyers to finance luxury items like swimming pools, detached garages, or gazebos in addition to basic renovations. It can be used for a primary residence, secondary residence, or investment property.

Like the FHA Standard 203(k) loan, the HomeStyle Renovation loan lets borrowers finance six months of mortgage payments if the house is uninhabitable during construction.

  • HUD consultant may be required

  • No minimum borrowing amount

  • The maximum amount of repairs can’t exceed 75% of the “after improved” value

  • Loan amount can’t exceed max county loan limit

  • All work must be completed within 12 months

Is a Renovation Loan Right for You?

A renovation loan could be just what you need to turn your house into a home you’ll love.

We’ll meet with you to discuss your goals, finances, and ideas to help find the right financing for you.

Contact one of our local Loan Officers today to learn more about renovation loans.

Contact Security First Financial

Original blog post by Primary Residential Mortgage Inc.

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Security First Financial is a division of Primary Residential Mortgage, Inc. PRMI NMLS 3094. Branch NMLS ID# 385589. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Colorado – Regulated by the Division of Real Estate, UCCC #987701-016. Arizona – Arizona Department of Financial Institutions 0902614. Massachusetts – Licensed by the Massachusetts Division of Banks as a Broker and Lender as #MC3094. Florida - Florida Office of Financial Regulation MLD646. Texas - This office is licensed and examined by the Office of Consumer Credit Commissioner of the State of Texas. 

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