I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.

Buying a home is a big deal. Buying a fixer-upper that needs renovations is an even bigger deal. The question is, can a mortgage include renovation costs so it doesn’t have to come out of your pocket right now? 


The short answer is yes – there are actually a few options you have available. 


Mortgage Renovation Loan #1: Fannie Mae Homestyle Renovation 

This type of renovation mortgage offered by Fannie Mae was created to help lenders have more options to offer their potential clients. Because so many people are renovating their homes, this type of mortgage makes it easier for someone to borrow money with the intention of fixing up the home with some of the money borrowed, ultimately raising the value of the home. 


It has a few good things going for it:

  • It lumps both the cost of the home and renovation costs under one loan
  • It has a standardized pricing and execution process
  • It offers flexibility for the borrower to use on any type of renovation project whether it’s replacing a roof, updating the kitchen, adding a room, or whatever else they want to do. 


Considering that the median age of homes is increasing, it makes sense that this type of loan is available to homeowners such as yourself. It’s opening the door for you to borrow the money you need to fix up a house to become your dream home. 


To qualify for this type of loan, there are a few things you should know. 


You need to meet Fannie Mae underwriting criteria. That’s something your mortgage lender can help you out with. 


Renovations must be 75% or less than the after-repair value (ARV) of the home, or purchase price + project cost. So if the home is expected to be worth $200,000 after repairs and the renovations are only going to cost $20,000, you should be fine. 


The after-value appraisal needs to be done before the loan is closed. Essentially the appraiser needs to predict how much the home will be worth once repairs are completed. 


Again, this is a good option. You also have another option, the FHA 203(k) Rehab Loan. 

Mortgage Renovation Loan #2: FHA 203(k) Rehab Loan

As part of the FHA, the FHA 203(k) Rehab Loan was created to help lower-income homeowners be able to finance both the purchase of the home and necessary renovations in one single loan. 


The criteria are a bit different than the Fannie Mae equivalent, but the end goal is similar. To qualify for this type of mortgage, you’ll need to 

  1. Meet the same FHA loan eligibility requirements as a regular FHA mortgage loan
  2. The home needs to be at least one year old
  3. The work required must cost at least $5,000
  4. The total value of the home purchase and renovation can’t exceed the limits for your area


Again, this is a great option if you have a relatively low income, poor credit, or don’t have the cash on hand to make a 20% down payment for a conventional mortgage. 


We should also mention one other option you have – refinance. 


Mortgage Renovation Loan #3: Refinance Your Current Home

The third option to consider is to refinance your current home loan. This is the option that makes sense if you’re considering remodeling your home instead of moving. 


This lets you take advantage of the equity you’ve built up over time in your current home. For example, let’s say you owe $300,000 on the home but it’s worth $350,000. You can take out a new $350,000 mortgage and pocket the $50K you have in equity. Then you can use that $50K to fund your renovation projects!

If you are set on moving into a different home, this option doesn’t make sense. Your best bet is to consider one of the other renovation mortgage options from Fannie Mae or the FHA. But if refinancing to fix up your current home sounds good, send us an email at [email protected] and we’ll be in touch soon!

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