Stewardship Capital

Renovation Loans: Buy or Refinance and Fix Up in One Loan

Some homes need work. A renovation loan lets you finance the home and the repairs together, in one loan. That can open doors for buyers who find a good home that needs love. This page explains the main programs and how the process works.

What is a renovation loan?

A renovation loan bundles the cost of a home and its repairs into one mortgage. It can be used to buy a home that needs work, or to refinance a home you own and fix it up. The loan amount is often based on what the home will be worth after the work is done. The repair money is held back and paid out in steps as the work is completed.

What renovation programs are there?

What is the FHA 203k Limited loan?

The FHA 203(k) Limited is for smaller repairs that are not structural. Think paint, flooring, kitchens, baths or a new roof. It has a lighter process than the Standard version. Dollar limits and rules are set by FHA and can change.

What is the FHA 203k Standard loan?

The FHA 203(k) Standard is for bigger projects, including structural work. It usually needs an FHA consultant to review the plans and the budget, and the process takes more time and paperwork.

What is Fannie Mae HomeStyle?

HomeStyle is a conventional renovation loan from Fannie Mae. It covers a wide range of improvements, and it is not limited to government-backed borrowers. Rules on what work counts and on property types vary by investor.

What is Freddie Mac CHOICERenovation?

CHOICERenovation is Freddie Mac's conventional renovation option. It works much like HomeStyle. Details differ, so Stephen compares the two for your project.

Can a VA loan be used for renovation?

Sometimes. VA rules allow repairs and improvements to be part of a VA loan, but not every lender offers it, and the process is stricter. Stephen confirms what is possible on your file. Read more on our VA loans page.

What is a barndominium, and can it be financed?

A barndominium is a barn-style building with living space inside. Some are new builds. Others are older buildings converted to homes. Lenders often struggle with them because there are few similar sales to compare. Some are financed as construction projects, and some as renovations. The right path depends on the building, the land and the lender. Stephen confirms the options early.

How does the process work?

Renovation loans have more steps than a regular loan. The steps are similar across programs, but each has its own rules.

  • Pick the home and decide on the work.
  • Get bids from licensed contractors and write up a scope of work.
  • The lender reviews the plans, the budget and the contractor.
  • An appraisal estimates the value after the work.
  • The loan closes, and repair money is held in an account.
  • Work is inspected and paid in stages.

Many programs include a cushion in the budget for surprises. How much varies by program.

What mistakes should I avoid?

A few common ones can slow a renovation loan.

  • Choosing a contractor before the lender approves them
  • Using a rough estimate instead of a written bid
  • Starting work before closing, when the program does not allow it
  • Leaving out a cushion for surprise repairs
  • Planning a tight timeline without room for inspections

A short talk with Stephen before you sign any contract can save time and money.

Which renovation loan fits me?

It depends on the size of the work, the property, your credit and your plan. A small cosmetic project is a different fit than a gut remodel. Realtors can help buyers by getting contractor bids early, since the bids drive the loan. See our Buy a Home page for the buying steps, and check loan limits by county for your county.

Common questions

What is the difference between a 203k Limited and Standard?

The Limited is for smaller, non-structural repairs and has a lighter process. The Standard is for larger projects, including structural work, and usually needs an FHA consultant.

Can I refinance and renovate in one loan?

Often, yes. Several renovation programs work for refinances as well as purchases. Stephen confirms the rules for your property.

When do contractors get paid on a renovation loan?

Repair money is held by the lender and paid in stages after work is inspected. The exact steps depend on the program.

Can a barndominium be financed?

Sometimes. It depends on the building, the land and the lender. Stephen checks early because lenders treat these differently.

Want to talk it through?

Stephen is happy to answer questions and look at your situation. There is no pressure and no cost to ask.

Contact Stephen

This is not a quote, a commitment to lend or an offer of credit. Stephen Chakerian, NMLS #2193331 | Stewardship Capital, a team of Barrett Financial Group, L.L.C., NMLS #181106 | Equal Housing Opportunity.