A renovation loan lets you buy a home and finance the repairs in one mortgage. Two common options are the FHA 203(k) and the Fannie Mae HomeStyle loan. This guide compares them so you can choose the right renovation mortgage.
The short answer: both let you roll renovation costs into your loan, but the FHA 203(k) is for FHA-eligible buyers with more flexible credit, while HomeStyle is a conventional option that may allow more renovation types. See our rehab loan page, FHA home loan info, and get a quote.
What a renovation mortgage is
A renovation mortgage combines the purchase price (or refinance amount) and the renovation costs into a single loan. The home's after-improved value is used to qualify, so you can borrow based on what the home will be worth after repairs.
How the FHA 203(k) works (limited vs standard)
The FHA 203(k) comes in two versions:
- Limited 203(k): for smaller projects (up to a set cap), with a simpler process.
- Standard 203(k): for larger or structural renovations, requiring a 203(k) consultant.
Both require the home to meet FHA standards after repairs.
How the HomeStyle renovation loan works
Fannie Mae HomeStyle is a conventional renovation loan. It can be used for purchases or refinances and may allow a wider range of renovations, including luxury items. It typically requires stronger credit than the FHA 203(k).
Side-by-side comparison
| Feature | FHA 203(k) | HomeStyle |
|---|---|---|
| Down payment | As low as 3.5% | As low as 3% (or 5%) |
| Credit | More flexible | Stronger credit needed |
| Renovations | Must meet FHA standards | Broader range allowed |
| Consultant | Required for standard | Often required for large projects |
Choosing contractors and planning the budget
- Use licensed contractors with references
- Get detailed bids in writing
- Plan a contingency for surprises
- Confirm what your loan program allows
Timeline from offer to finished renovation
- Get pre-approved for a renovation loan
- Make an offer and get bids
- Appraisal uses the after-improved value
- Close and begin renovations
- Draws are released as work is completed
When you are ready, get a free quote or set up rate alerts.
This article is for general information only and is not a commitment to lend. Renovation loan requirements depend on your lender and program.
