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WHAT are Renovation Loans?

Renovation Loan Basics

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Renovation loans allows addition of a construction loan to a home loan.  This can be for refinance or purchase. These loans were introduced in the 1960's by HUD.  Fannie Mae also offers renovation that operates similarly.
 
HUD & Fannie Mae are US government enterprises offering renovation loans since the 1960's.  HUD 203K is a federally insured loan that offers a construction loan for home improvements.  This is available for a home purchase or refinancing a home to incorporate construction costs of any residential renovation project.  A full range of home improvements are allowed.  From finished improvements to major renovations including room additions and adding income properties are allowed.  The loan leverages the current equity and future value of improvements.

HUD 203K Renovation Loan
HUD offered since the 1960's to help rebuild blighted neighborhoods.  One of the lowest down payments of 3.5%.  Requires PMI throughout the life of the loan.

Fannie Mae HomeStyle Loan
Homestyle is modeled after the HUD 203K loan.  This process is similar.  Purchase requires a minimum of 5% down payment.  PMI can be removed about 20% equity.
  
Purchase
When buying a home, renovation loans only adds more opportunities for you.   From freshening a tired looking home with new finishes with new flooring, painting, fixtures and appliances to major additions like adding a master suite, these loans and create your dream home to enjoy years to come.
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Refinance
Current homeowners can take advantage of equity in your home and the value in improvements to finance your renovation project.  The construction costs will be incorporated into the refinance of your home loan at the same interest rate.  There is frankly no comparison to borrow funds for a construction loan. 

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Renovation Loans:  Limited or Standard
​Renovation loans offers two types: Limited or Standard.
​Limited - is a simplified process for renovations under $35,000.  This is best suited for renovations that consist of finished types of improvements and deferred conditions.  Upon funding of loan, allows two release of funds, Initial and final.  There are limitations of these where structural changes or at the discretion of the lender, may require a standard renovation loan.  Please consult with an experienced lender or 203K consultant.
​Standard - renovation loans are over $35,000.  The maximum is determined by FHA loan limits and the appraisal with improvements. This requires services of a HUD 203K consultant to assist in compliance, construction bid and funds release once the loan funds.

Process
There are several options that affect the process of the renovation loan.  Here are the following options that determine the loan process:
  • Purchase or Refinance
  • HUD or Fannie Mae
  • Limited or Standard
  • Lender

Please view our HOW page for more details

Improvements 
The most flexible feature of the renovation program is the range of improvements.  Most fixed improvements are allowed.
  • Repair existing foundation
  • Structural alterations
  • Wells/septic public water/sewer systems
  • Repair/Replace plumbing, heating, AC, electrical, foundation & roof
  • Improve functions and modernization
  • Aesthetic appeal - Flooring, paint, appliances, cabinets, fixtures
  • Energy conservation improvements (mandatory, EEMs)
  • Improvements for disability
  • Site improvements, landscaping, exterior decks, patios and porches
  • Lead based paint remediation
  • Adding 1 -3 family structure (must attach)

Types of Property
Renovation Loans flexibility continues with supporting most types of properties: 
  • Detached single family
  • Multi-family up to 4 units
  • Condominiums/Townhomes (FHA approved)
  • Mix use of residential and commercial
  • Manufactured (non structural)​
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Our specialty is financing with focus and expertise on construction financing.  We have a full portfolio and a process to identify financing that best meets your needs and goals. 
Our years of experience have developed firsthand knowledge and relationships of the full range of professionals needed in construction.   
We developed a team approach of highly coordinated and compatible resources to assist in feasibility, survey, design, permit process and build to the final product.     

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PictureWill Johnson, Renovation Loan Consultant "Work with Will"
"Financing is the Foundation to building ADUs".   Will shares his expertise to renovation/construction financing since 2009.  Will Johnson is a licensed mortgage loan officer specialized and committed to assist clients in creating financing to build ADUs and income properties.  Will has a full portfolio of financing solutions to meet the needs of every homeowner and home buyer.​
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Telephone: 

(619) 295-9455-c
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  • Home
    • What
    • Why
    • How - The Process
    • Resources
    • About US
    • IPPrivPolicy
  • Renovation
    • Home Improvements
    • Room Addition
    • Before & After
  • Who
    • Home Buyers
    • Home Owners
    • Realtors >
      • Kickstart your Marketing
      • Create Your Team
      • Reno Realtor
  • ADU
    • Overview
    • ADU Demand
    • Financing ADUs
    • Process
    • ADU Plans
    • ADU Resources
    • ADU Video Series
    • Desktop Feasibility
  • Blog