Conventional renovation loans, such as Fannie Mae’s HomeStyle Renovation and Freddie Mac’s CHOICERenovation, let you finance a purchase and improvements together based on the home’s value after the work. They allow down payments as low as 3% to 5%, can be used for second homes and investment properties, and often cost less than FHA 203(k) loans for borrowers with good credit.
How they work
An appraiser estimates the home’s value once the planned work is done. You can borrow against that “as-completed” value; for HomeStyle, renovation costs can be up to 75% of it on a purchase. Funds sit in an escrow account and are paid to your contractor in draws as work is completed and inspected.
Compared with FHA 203(k)
| Conventional renovation | FHA 203(k) | |
|---|---|---|
| Down payment | From 3% to 5% (primary home) | 3.5% |
| Credit | Usually 620+; best pricing at higher scores | 580+ at many lenders |
| Mortgage insurance | PMI, removable | FHA insurance, usually for the loan’s life |
| Property types | Primary, second home, investment | Primary residence only |
| Luxury items | Generally allowed (like pools) | More restrictions |
What to prepare
- A licensed, insured contractor with a detailed bid and timeline.
- Plans and permits where required.
- A contingency reserve for overruns, often 10% to 15% of the budget.
- Patience: these loans usually take longer to close than a standard mortgage.
Alternatives
- Buy with a standard mortgage and renovate later with a HELOC once you have equity.
- Negotiate a lower price or seller credit for needed repairs; see negotiating price.
- An FHA 203(k) if your credit score is lower.
Estimate the full payment, including the renovation amount, with the mortgage payment calculator.
Common questions
What is a HomeStyle Renovation loan?
A Fannie Mae loan that combines the purchase and renovation costs, based on the home’s value after the work.
Can I use a renovation loan on an investment property?
Conventional renovation loans generally allow primary homes, second homes and investment properties; FHA 203(k) doesn’t.
Are renovation loans slower to close?
Usually, because of contractor bids, plans and appraisals based on the finished home.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.