How does a renovation loan work?
Instead of financing the house as-is and paying cash for repairs, you borrow against the after-improved value. Your contractor’s bids are part of the loan file, and repair funds are released in draws as the work is completed and inspected.
That structure opens doors nothing else does: the dated-but-solid house in the neighborhood you actually want, the estate sale with great bones, the home you already own that needs a real kitchen instead of another patch. The trade-off is process — bids, draws, and inspections — which is exactly why having a local processing team that runs these files matters.
Before you fall for a fixer, bring us the address and a rough scope. We will tell you honestly whether the project fits a renovation loan and which route serves it better.
FHA 203(k) or HomeStyle — what is the difference?
The FHA 203(k) is the FHA route — 3.5% down and FHA’s flexible credit guidelines. HomeStyle is Fannie Mae’s conventional counterpart. Both finance purchase-plus-renovation in one loan; the right choice turns on your credit, down payment, and the property.
The 203(k) comes in two sizes: a limited version for smaller, non-structural projects and a standard version for bigger work, which involves a consultant who helps oversee the project. HomeStyle follows conventional guidelines and can fit a wider range of property types. Neither requires you to be a contractor or a house-flipper — most of our renovation borrowers are ordinary buyers who found the right house under the wrong kitchen.
Because the details differ, we compare both against your file on one call: down payment, total cost, timeline, and how the draws would run for your project.
What kinds of projects can a renovation loan cover?
The work must be attached to the home and add lasting value: kitchens and baths, roofs and systems, additions, and structural repairs on the standard programs. Cosmetic-only plans and luxury add-ons are where the limited programs draw their lines — bring the scope and we will sort it.
Practical tip from real files: the projects that close smoothly are scoped before the offer, not after. A contractor walk-through early — before you write — gives the bids that make underwriting and appraisals go right the first time. We will introduce the sequence on our first call so nobody is scrambling during your contingency window.
How do contractors get paid?
Your contractor provides bids before closing; after closing, funds are released in draws as work is completed and inspected. That protects you — money follows finished work — and it is why choosing a contractor comfortable with draw paperwork matters as much as the bid price.
Our Edina processing team coordinates the draw schedule with you and your contractor, so you always know what has been released, what is next, and when the final draw and re-inspection happen. Renovation loans reward organized files; organized is what this team does.
Program details are educational and current as of November 2026; guidelines change and every project is reviewed individually. Confirm current terms on a call.