In short
A home improvement loan uses your home's equity to fund repairs or upgrades. Common options are a HELOC or home equity loan (600 minimum credit), which keep your current mortgage, or a renovation refinance such as an FHA 203(k) (from 500 credit) that sizes the loan on the home's value after the work.
Reviewed by Scottie Campbell, NMLS #1610726 · Last updated October 18, 2026
What is a home improvement loan and how does it work?
A home improvement loan uses your home's equity to pay for repairs or upgrades. The most common choices are a HELOC (draw as the work progresses) or a home equity loan (one lump sum), both with a 600 minimum credit score, which leave your existing first mortgage in place. If your equity is thin, an FHA 203(k) refinance (from 500 credit) or a Fannie Mae HomeStyle refinance can size the loan on the home's value after the work is done.
Key takeaways
Whether it's a new roof, a kitchen remodel or an addition for a growing family, your home's equity can pay for the work without emptying your savings or living on credit cards. I'm Scottie Campbell, and I'll walk you through every way to fund the project so you can pick the one that fits, with credit options starting at 600, or 500 through an FHA 203(k).
Paying for the Project Without Draining Your Savings
You love your home, but it needs something. A kitchen that fits how your family actually cooks. A primary bath that isn't original to the house. A roof, an HVAC system, a bedroom addition for a growing family or an aging parent. The question isn't whether the project is worth doing. It's how to pay for it in a way that makes sense five and ten years from now.
A home improvement loan uses the equity you've already built to fund the work. There isn't one single product with that name. It's a category, and the right tool depends on the size of the project, how the work will be paid out, and whether your current first mortgage is worth keeping.
Your Main Options Side by Side
| Option | How the money arrives | Starting credit score | Often fits |
|---|---|---|---|
| HELOC | A line you draw from as the work progresses | 600 | Phased projects or a budget that may shift |
| Home equity loan | One lump sum at closing with a set repayment schedule | 600 | A fixed-price contract you know up front |
| Cash-out refinance | Replaces your first mortgage with a larger one | Follows the loan type you refinance into | When changing your first mortgage makes sense anyway |
| FHA 203(k) refinance | New FHA loan based on the home's value after the work | 500 | Bigger renovations where equity today is thin |
| HomeStyle refinance | New conventional loan based on the value after the work | No minimum with Fannie Mae DU approval (620 manual) | Larger projects with stronger credit |
Your rate depends on your scenario and the day's market. Reach out and I'll price it for real.
HELOC and Home Equity Loans: Keep Your First Mortgage
For a lot of homeowners, the simplest answer is a second lien that sits behind the mortgage you already have. You leave your first mortgage alone and borrow only what the project needs.
- HELOC. Draw as you go and pay interest only on what you've used. It's a good match for projects done in stages, or when the contractor bills in phases.
- Home equity loan. One lump sum and a set payment schedule. It's a good match when you have a signed, fixed-price bid and want predictability.
The credit floor for either is 600. A few details shift with your profile: if your debt-to-income ratio is above 45%, the minimum moves to 680, and lines over $500,000 need a 720 score. Lenders also want to see enough equity left over after the new loan, so your home's current value matters.
Renovation Refinances: Borrow Against the Finished Home
If you haven't built much equity yet, a second lien may not cover the project. That's where a renovation refinance can help. An FHA 203(k) or Fannie Mae HomeStyle refinance replaces your current mortgage and sizes the new loan on what the home will be worth after the improvements. Renovation funds go into escrow and are paid to your contractor in stages as work is completed and inspected.
The FHA 203(k) allows credit scores from 500, which makes it one of the most forgiving ways to fund a serious project. HomeStyle has no minimum score with a Fannie Mae DU approval (620 if manually underwritten) and allows a wider range of improvements. What that means for you is that thin equity or past credit bumps don't automatically take a project off the table. It's never a no. It's always a how.
Questions I Ask Before Recommending Anything
- What's the real budget? A written contractor bid beats a ballpark every time.
- Is the work phased or one and done? That often decides HELOC versus lump sum.
- Are your current first mortgage terms worth keeping? If so, I lean toward a second lien. If not, a refinance may solve two problems at once.
- How long will you stay? That changes how we weigh closing costs against monthly cost.
- Does the project add value? I'm a real estate investor myself, and I'll give you an honest take on which improvements tend to pay back and which are mostly for your own enjoyment. Both are valid, as long as you know which is which.
Why the Way I Work Matters Here
With a bank, you get one underwriting desk and one set of rules. If your project or profile doesn't fit that box, the answer is no. I work with multiple investor partners, so if one's guidelines don't fit, I take your file to one that does.
Before you choose, I run a Total Cost Analysis that compares your options over the time you expect to own the home, including closing costs, not just the monthly payment. Then we put it in a Mortgage Action Plan. My job is to educate and empower you. Your job is to decide.
Let's Talk About Your Project
I'm Scottie Campbell, a Mortgage Advisor since 2003 and the owner of Waymaker Mortgage Company, with an office on W 7th St in Georgetown, TX. Send me your contractor's bid or even a few photos and a rough number, and I'll lay out your options in plain English. Feel free to text me. Here to serve.
Information on this page is general and educational. It is not a commitment to lend or an offer of credit. Programs, guidelines and eligibility change and depend on your full scenario. Waymaker Mortgage Company, NMLS 2440476. Equal Housing Lender.
Quick facts
- Minimum credit score
- 600 for a HELOC or home equity loan; 500 with an FHA 203(k)
- Higher-DTI HELOC
- 680 minimum above 45% debt-to-income
- Large lines
- 720 minimum for lines over $500,000
- Common structures
- HELOC, home equity loan, cash-out or renovation refinance
- Collateral
- Your home
Is this loan right for you?
Who it's for
- Homeowners with equity who want to remodel, repair or add on
- Owners who want to keep their current first mortgage in place
- Homeowners with limited equity who need a renovation refinance
- Families planning phased projects over several months
Who it may not fit
- Very small projects that savings can comfortably cover
- Homeowners planning to sell soon, where closing costs may outweigh the benefit
Pros and cons
Pros
- Several structures to match the project and your credit
- HELOCs let you draw as you go and pay interest only on what you use
- Second-lien options keep your existing first mortgage untouched
- Renovation refinances can work with thin equity and credit from 500
- Multiple investor partners if one set of guidelines doesn't fit
Trade-offs to weigh
- Your home is the collateral
- Closing costs apply, and renovation loans add inspections and staged draws
- HELOCs are variable lines, so borrowing costs can change
Frequently asked questions
What credit score do I need for a home improvement loan?
For a HELOC or home equity loan, the minimum is 600. If your debt-to-income ratio is above 45%, it's 680, and lines over $500,000 need 720. If you do the project through an FHA 203(k) refinance, scores start at 500.
Should I use a HELOC or a home equity loan?
If the work happens in phases or the budget may change, a HELOC lets you draw as you go and pay interest only on what you use. If you have a fixed-price bid, a home equity loan gives you one lump sum and a set payment schedule. I'll help you match it to your contractor's billing.
What if I don't have much equity yet?
A renovation refinance like the FHA 203(k) or Fannie Mae HomeStyle sizes the new loan on the home's expected value after the improvements. That can make a project possible even when your equity today is limited.
Will I have to refinance my current mortgage?
Not necessarily. A HELOC or home equity loan sits behind your existing mortgage, so you keep it as is. A cash-out or renovation refinance replaces it. Which one makes sense depends on your current loan terms and your total cost over time.
Can I do the work myself?
With a HELOC or home equity loan, the funds are yours to manage, so you have more flexibility. Renovation refinances like the 203(k) and HomeStyle generally require a qualified contractor, a written bid and staged payouts after inspections.
Which home improvements add the most value?
It depends on the home and the neighborhood. As a real estate investor myself, I'm happy to give you an honest opinion on which projects tend to pay back at resale and which are mainly about enjoying your home more.
Related loan programs
Low down payment options, dozens of down payment assistance programs and a Greenlight Approval that helps your offer compete. It's never a no. It's always a how.
Flexible credit, low down payment, and dozens of assistance programs. I'll show you how FHA fits your plan, then you decide.
No monthly mortgage insurance, no minimum credit score on my end, and VA loans funded in house by Waymaker Mortgage Company with underwriting through multiple investors.
Last updated October 18, 2026 · Reviewed by Scottie Campbell, NMLS #1610726. This page is educational and not a commitment to lend; program details change — ask for current figures.