What do you do if you found your dream home but just found out it doesn’t qualify for financing because it needs a new roof? Or what if you have found a home and love everything about it, except the 70’s style kitchen with the pink Formica countertop? The only way you will buy it is to update the kitchen. But how can you afford to do it? These are both instances where a renovation home loan may be the answer.
Renovation Home Loans
You cannot add extra funds for renovations and repairs on a standard conventional or FHA loan. Some products allow for an “escrow holdback,” but these are typically for amounts not greater than $5000 to be used for minor repairs. With these loans, up to $5000 is put into escrow at closing and disbursed once the repairs are complete.
However, there are loan products available for home renovations.
FHA Renovation Loans
There are two renovation loans under FHA: the 203k streamline and the 203k full renovation.
The streamline product allows for renovations up to $15,000 and does not include “structural” repairs, adding an addition, or a pool. The streamline product can be used for repairs, such as a new roof, flooring, or other minor modifications up to the $35,000 maximum.
The FHA full renovation loan does allow for structural modifications and additions but does not allow for putting in a pool. However, the loan will enable repairs to a pool for up to $1500. The minimum repair amount on the full renovation loan is $5000.
Both loans follow standard FHA guidelines with a low 3.5% down payment and require mortgage insurance based on the loan term and down payment amount. They also must not exceed the maximum FHA loan amount. The renovation loans typically require a higher FICO credit score and usually have an approximately 1/2 percentage point higher than the standard FHA loan, but this may vary by lender. They also can only be used for a primary residence.
Fannie Mae Homestyle Renovation Loan
The Fannie Mae Homestyle Renovation loan allows borrowers up to 97% of the fixer-upper cost, leaving you with a low 3% down payment. Whichever is lower, the cost of renovations or the expected value of the home after renovations is the amount allowed to borrow.
Fannie Mae Homestyle Renovation loans can be used for renovations such as critical repairs, energy upgrades, landscaping, and luxury projects.
This renovation loan is available as a 30- or 15-year fixed-rate mortgage or an adjustable-rate mortgage. A minimum of 620 credit score is required to qualify.
Freddie Mac Choice Renovation Loan
Like the FHA 203(k) and Fannie Mae Homestyle loan, Freddie Mac’s CHOICERenovation loan allows borrowers to roll the costs of repairs in the monthly mortgage. The CHOICERenovation loan comes with low down payment requirements, and borrowers can finance renovations that cost up to 75% of a home’s value, as long as they qualify for the total amount.
When developing the CHOICERenovation loan, Freddie Mac had four types of people in mind:
- First-time home buyers.
- Homebuyers who have few new homes to choose.
- Senior homeowners who need accessibility improvements.
- Multigenerational households who to customize a home to fit their needs.
Marimark Mortgage
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.

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