Renovation Loans: FHA 203(k) vs. HomeStyle, and How They Work
A renovation loan lets you buy or refinance a home and finance the repairs in a single mortgage. The main options are FHA 203(k), in Limited and Standard versions, and Fannie Mae HomeStyle. The right one depends on the scope of the work, your credit and how you want to handle mortgage insurance.
How do renovation loans work?
The lender holds the renovation money in escrow at closing and releases it in draws as approved work is completed. The loan is based on the property’s value after the repairs are done, so the appraisal looks at the home as completed.
What is the FHA 203(k)?
Limited 203(k). For non-structural work, with a repair cap of $75,000 for case numbers assigned on or after November 4, 2024. Think roofing, flooring, windows, appliances and updates.
Standard 203(k). For structural work and major rehabilitation. The minimum rehab cost is $5,000, there’s no separate cap on repair costs, and an independent HUD consultant is involved. The maximum loan is the lesser of the FHA limit for the area or 110% of the after-improved value (100% for condos).
The home has to be your primary residence.
What is HomeStyle Renovation?
Fannie Mae’s conventional renovation loan. For many purchases, renovation costs can’t exceed 75% of the lesser of the purchase price plus renovation costs or the as-completed appraised value. It isn’t limited to cosmetic work, but the lender must approve the scope, budget, contractors and after-renovation value.
Which fits you?
• 203(k) often fits borrowers who need FHA’s flexibility on credit or down payment.
• HomeStyle often fits borrowers who qualify conventionally and want to avoid FHA mortgage insurance.
We’ll compare both on your numbers.
What should you plan for?
• A longer timeline. Bids, scope reviews and appraisals add time. Tell your agent so the offer’s timeline is realistic. [LINK: TBD underwriting post]
• Contingency. Renovation budgets often run over. Plans typically require a reserve for overruns.
• Approved contractors. The lender reviews bids and contractor documentation.
• Payments during the work. If the home isn’t livable, eligible mortgage payments can sometimes be financed for a limited time.
When does it make sense?
When you’ve found the right location but the home needs wor
k, and you don’t want to pay for repairs out of pocket or take out a second loan.
Found a home that needs work? Send me the address and scope
Sources: HUD 203(k) program types; FHA 203(k) limited repair cap effective for case numbers assigned on or after November 4, 2024; Fannie Mae HomeStyle Renovation requirements.
Mike Belfor, Branch Manager and Mortgage Loan Originator, American Pacific Mortgage, NMLS 264700 (Company NMLS 1850). Equal Housing Opportunity. Guidelines change. Updated September 18, 2026.
Buy a home and finance the repairs in one loan. How FHA 203(k) Limited and Standard and Fannie Mae HomeStyle work, and which fits your project.
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