A renovation loan combines the cost of purchasing or refinancing a home with the expenses of repairs, upgrades, or renovations into one mortgage. These loans are designed to help borrowers improve properties that may not be move-in ready, increase property value, or customize a home to their preferences. They are offered by banks, credit unions, and specialized lenders, often backed by government programs (e.g., FHA, Fannie Mae) or as private/non-qualified mortgage (non-QM) options.
FHA 203(k) Loan:
A government-backed loan insured by the Federal Housing Administration (FHA) for purchasing or refinancing a primary residence and funding repairs or upgrades.
Two Subtypes:
Limited 203(k): For minor, non-structural repairs (e.g., flooring, painting, appliances) up to $35,000, with streamlined requirements and no consultant needed.
Standard 203(k): For major structural repairs or renovations (e.g., roof replacement, room additions), requiring a HUD consultant to oversee the project.
