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Renovation Loan Options

Finance a home purchase and remodel with one loan
or refinance based on the as-completed value to maximize your equity.

Homestyle
Renovation

Available to owner occupants and investors, and permits the construction of an accessory dwelling unit (ADU).
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FHA 203(k)
Renovation

FHA's renovation loan product is available only to owner occupants with a low 3.5% equity or down payment requirement.
Learn More

VA
Renovation

Available to veterans and active duty service members only for up to $50,000 in renovation costs.
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We offer three types of hard to find renovation loans:

  • FHA 203(k)
  • Fannie Mae Homestyle
  • VA Renovation Loans
 

Some homes need a little TLC.  Others need to be completely redone before you’d move in or rent it out.  Many times, people want to buy a home that needs work because of location, value, or unique details that make the home perfect for them – if only it were move in ready – but are deterred from these houses because they don’t have enough money available to make the needed repairs.  This is where renovation loans come in.  Renovation loans allow you to borrow enough to purchase the home AND have the home remodeled – all in one loan.

The advantages of taking one loan to finance the purchase and the project are plenty.  For starters, you’ll only have one set of closing costs and will only need to go through the loan process one time.  Your loan will be based on the “as-completed” value of the home, so you’ll have a better understanding of what the home will be worth fixed up before closing, and it may prevent you from over improving the property for your neighborhood.  With a set budget and scope of work outlined before construction starts, you’ll be a in much better position to stay on track.  Homeowners who do not have the benefit of a formal appraisal before starting a renovation may end up putting too much money into a home.  While this is fine for owners who plan to live in a home long term, for those who are concerned with resale value it could out you in a position to lose money if the home needs to be sold sooner than expected.

Since a lender’s money is also at stake, they will thoroughly review the property’s value as well as the improvements you’d like to complete before lending the funds to purchase the home.  They have procedures in place to verify that work is complete before releasing additional renovation funds at each stage of the project.  For a refinance, the renovation loan will go toward paying off your old loan, with the balance covering the remodel in draws as the work progresses.  Typically you cannot receive any additional cash at closing over and above the costs of the project.  All funds borrowed will need to either pay off your old mortgage or improve the home.

Do you already have a home that needs repair?  Are you planning to buy a fixer upper?  Click here to apply for a refinance or to be pre-approved for a purchase. 

 

Which type of renovation loan is right for you?

Homestyle
& CHOICERenovation
  • Purchase or Refinance
  • Primary Residence, 2nd Home, or Investment Property
  • 3-5% Minimum Down Payment
  • Luxury Items Allowed
  • Structural Repairs Allowed
  • Building an ADU is Allowed
  • Maximum 5 Draws
  • Initial Draw for Materials Allowed
  • No Maximum Dollar Amount for Renovations (within county loan limits and 75% of as-completed value)
  • 6 Months to Complete Work

FHA 203(k)

Limited or Standard
  • Purchase or Refinance
  • Primary Residence Only
  • 3.5% Minimum Down Payment
  • Gift Funds Allowed
  • Luxury Items NOT Allowed
  • Structural Repairs Allowed on Standard
  • Maximum 5 Draws
  • Initial Draw for Materials Allowed
  • No maximum dollar amount for renovations (subject to loan limits)
  • 6 Months to Complete Work

VA

Renovation
  • Purchase or Refinance
  • Primary Residence Only
  • 0% Down
  • Luxury Items Allowed
  • Only MINOR Structural Repairs
  • Maximum 3 Draws
  • Material Draws NOT Allowed
  • $50,000 Repair Maximum
  • 4 Months to Complete Work

A Brief Outline of the Renovation Loan Process

PRE-APPROVAL (PURCHASES) or INITIAL UNDERWRITING (REFINANCES)

If you are planning to buy a home that needs renovations, we can provide a pre-approval before you've identified a home.  If you already own the home, the renovation loan will be considered a refinance.  While you are working on interviewing contractors, we can start the loan process and submit your income and credit paperwork to underwriting.

FIND A CONTRACTOR

For purchase loans, you'll first need to have a home under contract before your contractor can start preparing a scope of work and bid for your project, but it will be EXTREMELY beneficial to start talking to contractors while you're home shopping.  Once you've found a home, ideally you'll already have chosen a contractor.  Even with a contractor identified, you'll need additional time in your purchase contract to prepare a comprehensive bid and plan out your project.

PREPARE BID, GATHER CONTRACTOR DOCUMENTS

Plans, specs, and a detailed bid will be needed to order the appraisal.  For kitchen remodels, the type of cabinets and countertops must be identified in the bid.  For flooring the type of flooring needs to be identified.  You'll want to be as detailed as possible because material selections will impact the cost of your project.

SELECT HUD CONSULTANT

A HUD consultant will assist you in reviewing the bid, and will conduct the draw inspections as each phase of the work is completed.

ORDER APPRAISAL

Once you've planned out your project and your contractor has prepared the bid, and you've met with the HUD consultant for the work write-up, the appraisal can be ordered.  The appraiser needs all of the project details in order to estimate the home value as if the project is complete.  Instead of appraising your home "as-is," they will appraise it according to your plans - with a new kitchen / bathroom / addition with 2 more bedrooms / pool / outdoor dining area / etc.

OBTAIN FINAL UNDERWRITING APPROVAL

Once the appraisal is completed, your loan will go back to underwriting for final approval.  At this time you will also need to make sure any loan conditions for additional paperwork have been completed.  As with any loan, you will also need to keep up with all regular monthly payments until closing, and avoid opening new accounts, accumulating new debt, or switching jobs.

LOAN CLOSING

Once final approval is obtained and you're clear to close, you will sign your loan documents and close your loan.  No work is started before this step.  If you've requested an initial draw for materials, you will receive this check (made out to you and the contractor) at closing.

START YOUR PROJECT - WORK MAY BEGIN

Once your loan is closed, work may start.  Please be sure to review the requirements for your particular program (conventional Homestyle, FHA 203(k), or VA) regarding how soon work must begin, and how quickly it must be completed.  

REQUEST DRAWS AS EACH PHASE OF WORK IS COMPLETED

One of your contractor documents provided during the loan process is the draw schedule, outlining when each draw will be requested, and the amount of each draw.  As work is completed, you will submit a draw request to the loan servicing department and request an inspection.  If work is completely satisfactorily, a two party check will be issued to you and the contractor. 

FINAL INSPECTION

When all work is completed, you will request a final inspection and a final draw to close out your project.  The title company will check for any liens filed against the property and issue a title update.  Assuming everything is clear and all work is finished, you and the contractor will receive a final check.  Congratulations, you can now enjoy your newly remodeled home!

Which space will you create?

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Staged Living Room - BEFORE PHOTO Before