In short
A renovation loan is one mortgage that covers the home plus the cost of repairs, based on the home's value after the work is done. The FHA 203(k) allows credit scores from 500 for primary residences, and Fannie Mae HomeStyle is a conventional option with no minimum score on a DU approval (620 manual).
Reviewed by Scottie Campbell, NMLS #1610726 · Last updated October 18, 2026
What is a renovation loan and how does it work?
A renovation loan is a single mortgage that covers the purchase price (or your existing loan balance on a refinance) plus the cost of repairs or improvements. The loan amount is based on what the home is expected to be worth after the work is done. At closing, the renovation money goes into an escrow account and is paid out to your contractor in stages as the work gets finished and inspected. The two main programs are the FHA 203(k), which allows credit scores as low as 500, and the Fannie Mae HomeStyle, a conventional option with no minimum score when you get a Fannie Mae DU approval (620 if manually underwritten).
Key takeaways
Some of the best homes on the market need work. Maybe it's the right street with a dated kitchen, or the house you already own needs a new roof before it needs anything else. A renovation loan lets you roll the cost of the repairs into your mortgage, so you aren't draining savings or stacking a credit card on top of a house payment. I'm Scottie Campbell, and I've been doing this since 2003. I'm also a real estate investor, so I've lived the fixer side of this too.
One Loan for the House and the Work
Here's the problem a renovation loan solves. You find a home with good bones and a price that makes sense, but it needs a new HVAC system, flooring and a bathroom that hasn't been touched in thirty years. A regular mortgage only covers the house as it sits today. You'd have to come up with the repair money separately, usually right after you just spent your savings on a down payment and closing costs.
A renovation loan puts it all in one place. One application, one closing, one monthly payment. The appraiser values the home as it will be after the work is done, and that "as-completed" value is what the loan is built on.
What that means for you is you can shop for homes other buyers walk past, or fix the one you already own without a second loan.
The Two Main Programs
There are two programs I use most for renovation financing in Georgetown, TX and across the states I'm licensed in.
| Feature | FHA 203(k) | Fannie Mae HomeStyle |
|---|---|---|
| Loan type | Government insured (FHA) | Conventional |
| Minimum credit score | 500 (10% down from 500 to 579) | No minimum with DU approval; 620 manual |
| Occupancy | Primary residence only | Primary, second home or investment |
| Luxury items (pools, outdoor kitchens) | Not allowed | Allowed |
| Mortgage insurance | FHA MIP | PMI when under 20% equity, removable later |
| Purchase or refinance | Both | Both |
Quite frankly, neither one is better across the board. The FHA 203(k) is the more forgiving path on credit. HomeStyle is usually the better fit for stronger credit, larger projects with upgrades, or a property you won't live in full time.
How the Money Moves
This is the part people don't expect, so I walk every client through it before we start:
- Contractor bids first. You'll pick a licensed contractor and get a detailed written bid. The bid drives the renovation budget and the appraisal.
- Appraisal on the finished home. The appraiser reviews the plans and gives an as-completed value.
- Escrow at closing. The renovation funds don't go to you as cash. They sit in an escrow account.
- Draws as work is done. Your contractor gets paid in stages after inspections confirm the work was completed.
- Contingency reserve. Most files set aside a cushion for surprises, because there's always something behind the drywall.
It's a few more steps than a standard loan. My team handles the paperwork and keeps the contractor, appraiser and title company on the same page. High-tech, high-touch.
Buying vs. Refinancing
Both programs work two ways:
- Purchase. Buy a home that needs work and finance the repairs at closing. My FHA 203(k) Purchase and HomeStyle Purchase pages go deeper.
- Refinance. Already own? Replace your current mortgage with a new one that includes the renovation budget. See FHA 203(k) Refinance and HomeStyle Refinance.
If you have plenty of equity and a smaller project, a home equity loan or HELOC may be simpler. I'll show you both side by side.
Why Work With Me on a Renovation Loan
Renovation loans are a specialty. A lot of lenders don't offer them, and some that do treat them like a hassle. Here's what you get with Waymaker Mortgage Company:
- Multiple investor partners. A bank has one underwriting desk and one set of rules. If one investor's renovation guidelines don't fit your project, I take it to one that does.
- Greenlight Approval on purchases. We pre-underwrite your file up front, so your offer carries real weight with a seller, even on a house that needs work.
- Total Cost Analysis. I look at the total cost over the time you'll own the home, not just the payment. Sometimes buying the finished house is the better move. I'll tell you if it is.
- An investor's eye. I buy real estate myself. I'll help you think through which repairs add value and which ones don't.
On rates: Your rate depends on your scenario and the day's market. Reach out and I'll price it for real.
Let's Look at Your Project
It's never a no. It's always a how. Send me the listing or a few photos of your home and a rough idea of the work. We'll build a Mortgage Action Plan together. My job is to educate and empower you. Your job is to decide. Feel free to text me.
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
- Programs
- FHA 203(k) and Fannie Mae HomeStyle
- Minimum credit score
- 500 on FHA 203(k); no DU minimum on HomeStyle (620 manual)
- Loan based on
- As-completed value of the home
- Uses
- Purchase or refinance
- Contractor
- Licensed contractor with a written bid, generally required
- How funds are paid
- Escrow account, released in draws as work is completed
Is this loan right for you?
Who it's for
- Buyers who want a home in a good location that needs updates
- Homeowners who need repairs or improvements and would rather not take a second loan
- Buyers with credit from 500 who need the FHA 203(k)'s flexibility
- Investors and second-home buyers improving a property (HomeStyle)
Who it may not fit
- Anyone wanting to do the work themselves without a licensed contractor
- Homeowners with lots of equity and a small project, where a HELOC may be simpler
- Buyers who need to close on a very short timeline
Pros and cons
Pros
- One loan, one closing and one payment for the home and the repairs
- Loan amount based on the as-completed value of the home
- Options for credit scores from 500 (FHA 203(k))
- Works for both purchases and refinances
- Opens up homes that other buyers pass over
Trade-offs to weigh
- More paperwork and steps than a standard mortgage, including contractor bids and inspections
- Closing can take longer because the project has to be reviewed
- Renovation funds are paid in draws to the contractor, not to you
Frequently asked questions
What credit score do I need for a renovation loan?
It depends on the program. The FHA 203(k) allows scores as low as 500, with 10% down from 500 to 579. Fannie Mae HomeStyle has no minimum score when the file gets a Fannie Mae DU approval, and 620 if it's manually underwritten. If your score isn't where you want it yet, can't do it now doesn't mean can't do it ever. We'll map out the steps.
Can I do the renovation work myself?
In most cases, no. Both programs generally require a licensed contractor with a written bid, because the lender is paying for work based on a future value. If you're handy, talk with me about which parts of the project you can handle outside the loan.
Do I get the renovation money in cash?
No. The renovation funds go into an escrow account at closing and are paid to your contractor in stages after inspections confirm the work is done. That protects you as much as the lender.
Which is better, FHA 203(k) or HomeStyle?
It comes down to your credit, how much you're putting down, the type of property and the kind of work. FHA 203(k) is more forgiving on credit but is for primary residences only and doesn't allow luxury items. HomeStyle works for second homes and investment properties and allows upgrades like a pool. I'll run both for you in a Total Cost Analysis.
Can a renovation loan cover a pool or outdoor kitchen?
Fannie Mae HomeStyle can include improvements like pools and outdoor kitchens. The FHA 203(k) does not allow luxury items. If a pool is part of the plan, HomeStyle or a separate pool financing option is usually the route.
Is a renovation loan only for buying a home?
No. Both FHA 203(k) and HomeStyle offer refinance versions, so you can replace your current mortgage with a new one that includes the cost of the work.
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.