Renovation Loans
Finance the home and the work in one loan, using the value the property will have when the project is finished.
Renovation loans let you buy a house that needs work, or refinance one you already own, and roll the cost of the improvements into the mortgage. Instead of draining savings or taking a high rate credit line after closing, the repair budget is financed at mortgage terms.
Qualification is based on the after improved value of the home, so you get credit for the work before it is done. Funds are held in escrow and released to your contractor as the project hits agreed milestones.
How a renovation loan works
You choose the property, get contractor bids, and the appraiser values the home as it will be once the scope of work is complete. The lender closes one loan covering the purchase price plus the renovation budget, and the repair money sits in an escrow account.
As your contractor finishes stages of the project, inspections are ordered and draws are released. When the work is done, you are left with a single mortgage on an updated home.
- One closing, one rate, one monthly payment
- Repair budget escrowed and released in draws
- Contingency reserve built in for surprises
- Payment reserves available if the home is not livable during the work
What the money can cover
Eligible improvements are broad. Some programs allow structural work, additions, and even tear down and rebuild on the existing foundation, while lighter programs cap the budget and limit the scope to non structural items.
- Kitchens, baths, flooring, paint, and finishes
- Roofs, windows, siding, HVAC, plumbing, and electrical
- Structural repairs, additions, and layout changes on eligible programs
- Accessibility upgrades and energy efficiency improvements
- Health and safety repairs required by the appraiser
Choosing the right renovation program
Government and conventional renovation options each have their own limits, credit requirements, and paperwork. We compare them against your budget, your credit profile, and how ambitious the project is, then recommend the one with the best combination of cost and flexibility.
- Light rehab programs for cosmetic budgets and faster timelines
- Full rehab programs for structural and large scale projects
- Investor focused options for rentals and non owner occupied homes
Documents to gather
You will provide the standard mortgage package plus project paperwork. Lining up a licensed, insured contractor early is the single biggest thing you can do to keep the timeline on track.
- Recent pay stubs, W-2s, or tax returns
- Two months of bank and asset statements
- A detailed, itemized contractor bid and scope of work
- Contractor license, insurance, and references
Advantages
- Buy a home others pass on and make it yours
- Renovation costs financed at mortgage rates
- Qualify on the value after improvements
- One loan and one payment instead of two
Things to consider
- Contractor bids and approval add steps up front
- Draw inspections extend the timeline versus a standard loan
- Scope changes mid project require lender approval
- Do it yourself work is limited or not allowed on most programs
Common questions
Can I do the work myself?
Most renovation programs require a licensed, insured contractor. Self help work is rare and, where allowed, is limited to specific items and reimbursed only for materials.
How is the renovation budget paid out?
It is held in escrow and released in draws as inspections confirm each stage is complete. Contractors are paid from those draws, not by you out of pocket.
Can I live in the home during construction?
Often yes for cosmetic work. For larger projects, some programs let you finance several months of mortgage payments while the home is uninhabitable.
What if the project costs more than planned?
A contingency reserve is built into the budget for overruns. Larger changes require a formal change order and lender approval.
Program disclaimers
- * Higher interest rates apply
- ** For a 30-year, fixed-rate loan
- Program details are informational only and are not an offer for extension of credit or a commitment to lend. Terms are subject to change without notice.
Ready to explore Renovation Loans financing?
Start a conversation with a licensed loan officer, or begin your application whenever you're ready.