Renovation Loans

A renovation loan combines the cost of buying or refinancing a home with the cost of improving it into a single mortgage. The loan is based on what the home is expected to be worth after the work is done.

Justin Lazzaro, NMLS #1229453 | Reasy Financial, LLC, NMLS #2446155 | Licensed in Arizona, Pennsylvania, Florida, and Texas

Who a renovation loan fits

These loans suit buyers who find the right house in the wrong condition, and owners who would rather improve than move.

Buyers of homes that need work

Finance the purchase and the repairs together instead of paying for renovations out of pocket after closing.

Owners who want to improve

Refinance your current mortgage and roll planned improvements into the new loan.

Who it usually does not fit

Small cosmetic projects, do-it-yourself work, or a tight closing deadline. The extra steps take time, and most programs require a licensed contractor.

How a renovation loan works

1

You choose a contractor

Your contractor prepares a detailed written bid. The lender reviews the contractor's license, insurance, and experience.

2

The appraisal uses the plans

The appraiser estimates the home's value as completed, based on the bid and the scope of work.

3

Funds are paid in draws

Renovation money is held in escrow at closing and released to the contractor in stages as the work is inspected.

Common programs include the FHA 203(k), Fannie Mae HomeStyle, and Freddie Mac CHOICERenovation. Each has its own rules on eligible repairs. I am a mortgage broker, not a government agency.

How the programs compare

The main differences between these programs are who backs them and what kind of work they allow.

How common renovation loan programs compare
ProgramWho backs itWhat it covers
FHA 203(k)Insured by the Federal Housing AdministrationRepairs and improvements to a primary residence, with Limited and Standard versions
Fannie Mae HomeStyleConventionalA wide range of improvements, including on second homes and investment properties
Freddie Mac CHOICERenovationConventionalSimilar to HomeStyle, including repairs that protect against natural disasters
Home equity loan or lineVaries by lenderOwners with equity who want to keep their current first mortgage

Three things to know before you apply

1

Build in a contingency

Many programs require or recommend a contingency reserve in the budget for surprises found once walls are opened.

2

Timelines are longer

Contractor bids, plan review, and the as-completed appraisal add steps. Expect a longer closing than a standard purchase.

3

Not every project qualifies

Programs differ on luxury items, structural work, and whether you can live in the home during construction.

Guidelines change. I confirm current requirements with the lender before quoting anything.

Common questions about renovation loans

Short answers to common questions. Program rules vary by lender, so treat these as general guidance, not a loan decision.

Can I do the work myself?

Usually not for most of the work. Contractors do the bulk of it, and some programs allow limited do-it-yourself work with lender approval and inspections.

What repairs can be financed?

Anything from a new roof, kitchen, or bathrooms to structural repairs, depending on the program. Some programs exclude luxury items such as pools.

Do I make payments during construction?

Yes, payments begin after closing like any mortgage. Some programs let you finance mortgage payments for the period the home cannot be occupied.

How is the loan amount decided?

It is based on the purchase price or current balance plus renovation costs, measured against the appraiser's as-completed value.

Can I use it on an investment property?

The FHA 203(k) is for primary residences only. Conventional renovation loans can allow second homes and investment properties.

Where do you offer these loans?

I am licensed in Arizona, Pennsylvania, Florida, and Texas, and I work with lenders that offer FHA and conventional renovation programs.

Ready to talk it through?

Pick a time that works for you. We'll go over your goals and next steps, no pressure, just a conversation. Prefer to call or text instead? Reach me directly at (412) 638-4982, or book a quick Zoom if that's easier.