Different loan for renovations?

Maria, you may not need two separate loans. Renovation loans, such as FHA 203(k) or Fannie Mae HomeStyle, can finance the purchase of the home and qualifying renovations together. I’d talk with a lender experienced in renovation financing before shopping so you know which homes and improvements will qualify.

One loan, one closing. Not two. And there is a significant update since this thread was written that probably changes which product you want. HUD raised the Limited 203(k) maximum rehabilitation cost from $35,000 to $75,000. That came in Mortgagee Letter 2024-13 and applies to FHA case numbers assigned on or after November 4, 2024. The same letter stretched the rehab window to nine months on Limited and twelve on Standard, and raised the number of days you are allowed to be out of the house during the work from 15 to 30 on Limited. Energy improvements can sit on top of the $75,000. That matters a lot for you, because the old $35,000 ceiling pushed most real projects into the Standard 203(k), which requires a HUD-approved 203(k) Consultant, more paperwork, and a longer timeline. At $75,000, a very large share of "older home that needs work" projects now fit inside the Limited version, which does not require a consultant. Same money, much less friction. The thread already named the products correctly, so here they are lined up: - FHA Limited 203(k): up to $75,000 in rehab, minor remodeling and non-structural repairs only, no consultant required. - FHA Standard 203(k): larger and structural work, consultant required, no dollar cap beyond the FHA county loan limit. - Fannie Mae HomeStyle Renovation and Freddie Mac CHOICERenovation: the conventional equivalents. Better if you have solid credit and a decent down payment, since you avoid FHA mortgage insurance, and they allow a wider range of improvements including some luxury items that FHA excludes. - VA renovation loan, if either of you served. To answer the "how does this work" part directly, because this is the piece nobody explains well: the lender bases the loan on the after-improved value, not the current condition. You close on the purchase, the rehab money goes into an escrow account controlled by the lender, and it pays out to your contractor in draws as work gets completed and inspected. You do not get a check. Your contractor gets paid in stages against completed work. Two things that determine whether this goes smoothly: Your contractor has to be willing to work in a draw system, with a detailed written bid line-itemed the way the lender wants it, and be licensed and insured to the lender's satisfaction. Plenty of good contractors decline renovation loan jobs because of the paperwork and the payment timing. Find out before you are under contract, not after. Your lender has to actually do these regularly. A renovation loan handled by someone who does two a year will take twice as long and may not close. Ask any lender directly how many 203(k) or HomeStyle loans they closed in the last twelve months. If the answer is single digits, keep shopping. One Texas-specific note. Texas has unusually strict constitutional limits on home equity lending, which makes pulling cash out later to fund renovations more restrictive than it is in most states. That is a real argument for financing the work inside the purchase loan rather than planning to do it after with a home equity product. Ask a Texas lender to walk you through it specifically. Confirm the current Limited 203(k) cap with your lender before you plan around it. FHA adjusts these numbers, and this answer will age. I am a real estate professional, not a lender. Get the products priced side by side by someone who writes them. I am Zoltan Peresztegi, and I work in Los Angeles and the South Bay, so south Texas is not my market, but if you want an introduction to a strong San Antonio area agent I am glad to make one. Zoltan

Yes, there are loan options specifically designed for homes that need renovations, so you may not need two separate loans. Programs like FHA 203(k) and Fannie Mae HomeStyle Renovation loans allow qualified buyers to finance both the purchase price and the cost of approved renovations with a single mortgage. The best loan depends on the condition of the home, the type of renovations you're planning, and your financial situation. A lender can walk you through the options and help determine which program is the best fit. If you're considering a fixer-upper, it's a great idea to speak with a lender before you start shopping so you know exactly what your budget and financing options look like.

Yes, there are loan programs specifically designed for purchasing and renovating a home. Options such as renovation loans can allow you to finance both the purchase price and eligible renovation costs with a single loan, rather than taking out two separate loans. The best option depends on the property's condition and your financial situation, so it's a good idea to speak with a lender who offers renovation financing. **Juan Picos** REALTOR® | JohnHart Real Estate Serving Burbank, Glendale & Greater Los Angeles

A 203K is most likely the product you are looking for Maria. Keith Jean-Pierre Managing Principal The Dapper Agents Real Estate Operations in ALL 50 States

Good news: you don't need two loans. A renovation loan wraps the purchase price and the cost of repairs into one mortgage, and the loan amount is based on what the home will be worth after the work is done, not what it's worth today. That's actually a big advantage since it means you can buy a beat-up home at a lower price and borrow against its future value. The two most common options are the FHA 203(k) and the Fannie Mae HomeStyle. FHA is easier to qualify for but comes with more oversight on how the money gets spent. HomeStyle is more flexible on what you can renovate but typically needs stronger credit. Either way, you'll need contractor bids ready before you close since the lender needs to know exactly what the money is going toward. The angle most buyers miss is that this can actually be a smarter buy than purchasing a move-in ready home. You're paying less upfront for the property, financing the improvements at mortgage rates rather than credit card or personal loan rates, and building equity from day one as the renovations increase the home's value.

You don't need two separate loans. There are loan products specifically designed to finance both the purchase and the renovation in one mortgage. The FHA 203(k) loan is the most common option. It lets you buy a home and finance the renovation costs into a single loan. There are two types. The Standard 203(k) is for major renovations over $35K and requires a HUD consultant to oversee the project. The Limited 203(k), formerly called the Streamline, covers up to $35K in repairs and is simpler with less paperwork. Both require FHA-approved contractors and the work must be completed within a set timeframe after closing. Fannie Mae's HomeStyle Renovation loan is a conventional alternative that works similarly. You finance the purchase price plus renovation costs in one loan, and the appraiser bases the value on what the home will be worth after the renovations are complete. This program has fewer restrictions on the type of work you can do compared to the 203(k). Freddie Mac also offers the CHOICERenovation loan, which works the same way. The main advantage of these loans is that you only have one closing, one monthly payment, and one set of closing costs instead of financing the purchase and then taking out a separate construction loan or home equity line for the work. The rate is typically close to a standard mortgage rate, and you can finance everything from structural work to cosmetic updates. Talk to a lender who has experience with renovation loans specifically. Not every loan officer handles these regularly, and the process has more moving parts than a standard purchase. You want someone who has done them before and knows how to keep the project on track.

Maria, Im a realtor here in Devine, would you like me to connect you to my local lender? 210-860-2974

203k loan can be a good option. Also connect with Feeasy that can do loans like this.

No need for two loans. There are special loans for homes like this. Talk to a local lender who maybe can sit down with you and go over all your options.

I highly recommend you call a local mortgage lender in your area. There are renovation loans out there known as 203K Renovation. Based on your situation, the lender will give you the best advice. Any real estate agent in your area should be able to refer you to someone as well. Good luck!