The options to fund renovation costs are limited.
- Deplete your savings to pay out of pocket
- Use high-interest credit cards
- Obtain an unsecured personal loan
- Access existing equity in your home through a cash-out refinance or a home equity line of credit
What if none of those work for you? Finance of America Mortgage has a different solution!
Renovation Loans allow you to borrow money for the purchase or refinance of an existing home PLUS the cost of home improvements – all in a single mortgage loan. Eligible improvements range from general property maintenance like new HVAC, windows, or roof; to cosmetic updates like new flooring and paint or remodeling kitchens and baths; to a total gut renovation project or building an addition.
Renovation Loans are especially attractive to…
- Buyers who are looking to turn a “fixer upper” into their dream home
- Families looking for more space or making changes to support their goal of aging in place
- Homeowners with insufficient equity to do a cash-out or HELOC for renovation costs
- Homeowners who need more money to finish a project they already started
FHA Standard 203(k)
Requires use of a General Contractor and HUD Consultant. Designed for higher cost or more complex projects. Contractor is paid in draws as work is completed.
FHA Limited 203(k)
Allows up to 3 individual contractors and $35,000 in total rehab costs. Great for smaller, non-structural projects. Contractors are paid an initial deposit and the balance upon completion.
Conventional HomeStyle® Renovation
Requires use of a General Contractor. Great for any size project. Contractor can receive a deposit up front, and balance is paid in draws as work is completed.
Conventional HomeStyle® Energy
Allows for installation of EnergyStar® Rated materials like windows, appliances, or HVAC. Also allows for installation of renewable energy sources like solar panels. Contractors are paid in full after work is completed.
FHA 203(K) Rehab Loan
Frequently Asked Questions
Absolutely! Be sure to pick a lender who understands renovation loans. FAM is unique in that we have a special team dedicated only to renovation lending!
Instead of the normal “As Is” Value Appraisal, a Renovation Loan requires a “Subject To Repairs” Value Appraisal. The Appraisal will determine the value of the property assuming the proposed improvements were already completed.
The down payment is a percentage of the total acquisition cost which is not only the purchase price of the property, but also includes the total rehab cost. For example, if you purchase a house for $200,000 and the total rehab cost is $100,000, the total acquisition cost would be $300,000. The down payment would be a % of $300,000. The required down payment varies by program and other factors. Talk to a FAM Mortgage Advisor to learn more!
The following are included in the Total Rehab Cost: Contractor Bid Amount, 10-20% Contingency for unforeseen costs, architectural or permit fees (if applicable), and fees associated with administering the draw process after closing.
Interest rates vary depending on several factors. Talk to a FAM Mortgage Advisor to learn more!
In addition to typical qualifying documentation, renovation loans require your contractor to provide a bid for the work being completed, architectural plans & specs for any structural changes to the property, and general information about your contractor’s business. Other documentation may be required depending on the scope of the work.
We recommend you allow 60 days for closing. We will work diligently alongside you and your contractor to close as quickly as possible. It is important you and your contractor are prepared to provide the documentation requested to facilitate the mortgage approval.
No, we do not allow Do-It-Yourself or Owner/GC – even if you are a licensed contractor.
Yes. The Limited 203k can only include cosmetic updates, no structural changes to the property. The FHA Standard 203(k) and Conventional HomeStyle® Renovation allow for larger scale projects including structural changes like building an addition. The Conventional HomeStyle® Energy is limited to energy improvements only. Talk to a FAM Mortgage Advisor for more detail!
No. Finance of America Mortgage will set up a Rehab Escrow Account after closing to ensure the work gets completed AFTER closing.
Yes. Both FHA 203(k) products require the work be completed within 6 months of closing. The HomeStyle® Renovation must be completed within 9 months of closing. HomeStyle® Energy must be completed within 60 days of closing.
Using a mortgage calculator can help you calculate monthly payments on a home loan.
Use our refinance calculator to determine whether the costs of refinancing into a new home loan makes sense for your financial situation.
Mortgage Affordability Calculator
Use our mortgage affordability calculator to see how much home you can afford.
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Why Finance of America Mortgage?
We’re not about pushing loan papers. We’re about moving your dream forward. And we do that through knowledgeable local advisors, a personal approach, and a variety of smart loan options.