Yes, you can almost certainly get a loan to fix your house, and you have several routes to choose from. If you have equity built up, a home equity loan, a home equity line of credit, or a cash-out refinance will give you the lowest rates. If you don’t have much equity, or you’re buying a place that needs work, a government-backed renovation mortgage bundles repairs into the mortgage itself. And if you’d rather not put the house on the line at all, an unsecured personal loan can fund smaller projects quickly. The right pick depends on how much you need, how fast you need it, and how much equity you have to work with.
What Lenders Check Before Approving You
Four things drive almost every home improvement loan decision: your credit score, your debt-to-income ratio, your equity, and your employment history.
Credit sets the floor. Conventional products generally want a score around 620. FHA-backed programs accept scores down to 580 with a small down payment, and as low as 500 with more money down. A higher score also gets you a better rate, so even qualifying borrowers benefit from pushing the number up before applying.
Debt-to-income ratio compares your total monthly debt payments to your gross monthly income. The old 43 percent Qualified Mortgage cap was replaced by price-based thresholds in a 2020 rule change, but most lenders still treat the low-to-mid 40s as a practical ceiling on conventional products.
Equity determines how much you can borrow against the property. Lenders add your existing mortgage balance to the new loan and compare that total to the home’s appraised value. Most cap this combined loan-to-value ratio at 80 to 85 percent, though some stretch to 90 percent for borrowers with strong credit and income.
Employment rounds it out. Underwriting guidelines from the major mortgage agencies call for a reliable pattern of employment over the most recent two years, though a shorter history can work if the rest of your profile is strong.1Fannie Mae. Standards for Employment-Related Income
Home Equity Loans and HELOCs
If you have equity, these two products are the most common way to borrow for repairs. Both use your house as collateral, which keeps rates well below unsecured alternatives. That collateral is also what puts your home at risk if you fall behind.
A home equity loan gives you a single lump sum at a fixed rate, paid back in equal monthly installments over a set term of typically 5 to 30 years. It works well when you know the total project cost upfront and want predictable payments. The catch is that you get all the money at once, even if the renovation will take months, and you start paying interest on the full amount immediately.
A home equity line of credit works more like a credit card secured by your house. The lender approves a maximum limit, and you draw only what you need during a draw period that commonly runs 5 to 10 years. You pay interest only on what you’ve actually borrowed. Once the draw period ends, you enter a repayment phase of 10 to 20 years, during which you can no longer draw and must pay the balance down. HELOCs usually carry variable rates, so payments can move as rates move.
A HELOC tends to suit projects that unfold in stages or where costs are uncertain. Contractors regularly uncover hidden problems once walls come down, and a credit line you can tap in pieces beats borrowing a fixed amount and hoping it covers everything.
Cash-Out Refinancing
A cash-out refinance replaces your existing mortgage with a new, larger one, and you pocket the difference as cash. Owe $180,000 on a home appraised at $350,000, refinance into a $250,000 mortgage, and you walk away with roughly $70,000 minus closing costs.
The appeal is one monthly payment, often at a rate lower than a separate home equity loan. The downside is significant. You’re resetting the clock on your mortgage. If you’ve been paying for 12 years and refinance into a fresh 30-year term, you’ve just added decades of interest. Run the total interest cost over the life of the new loan before deciding this makes sense for a kitchen remodel.
Cash-out refinancing makes the most financial sense when current mortgage rates are close to or below your existing rate. When rates are substantially higher than what you’re already paying, a separate home equity product keeps your low-rate first mortgage intact.
Government-Backed Renovation Loans
Several federal programs bundle repair costs directly into a mortgage, so you can finance the work even if you have limited equity or are buying a fixer-upper.
FHA 203(k) Loans
The FHA 203(k) program rolls repair costs into a single FHA-insured mortgage in two versions. The Limited 203(k) covers renovations up to $75,000 with no minimum project cost and simpler paperwork. The Standard 203(k) handles larger projects with a minimum of $5,000 in repairs and no maximum dollar cap, though the total can’t exceed the property’s projected after-renovation value.2HUD.gov. Program Comparison Fact Sheet – FHA 203(k) Rehabilitation Loan Program
The Standard program requires a HUD-approved consultant to develop a construction plan and cost estimate. The Limited program lets borrowers prepare their own scope of work.3Office of the Comptroller of the Currency. FHA 203(k) Loan Program Community Developments Fact Sheet Both carry FHA’s more lenient credit requirements, so they’re accessible to borrowers who wouldn’t qualify for a conventional product.
The escrow structure is worth flagging. The lender holds the repair funds and releases them in stages as an FHA-approved inspector confirms completed work, with up to four intermediate draws plus a final draw. Ten percent of the renovation funds are held back until the final inspection clears.3Office of the Comptroller of the Currency. FHA 203(k) Loan Program Community Developments Fact Sheet That adds time and paperwork, but it also means your contractor gets paid only after the work is verified.
FHA Title I Loans
FHA Title I property improvement loans are built for smaller repairs. The maximum for a single-family home is $25,000, and loans under $7,500 don’t require your home as collateral. These fit targeted fixes like a new roof or HVAC system where the cost doesn’t justify a full renovation mortgage.
Fannie Mae HomeStyle Renovation
The HomeStyle Renovation mortgage finances virtually any type of renovation or repair inside a conventional loan. Unlike FHA 203(k), it covers investment properties and second homes on top of primary residences, and it accommodates manufactured homes for non-structural improvements like kitchen updates or energy-efficient upgrades.4Fannie Mae. HomeStyle Renovation Mortgages: Loan and Borrower Eligibility All renovation work must be completed within 15 months of closing.5Fannie Mae. HomeStyle Renovation: Renovation Contract, Renovation Loan Agreement, and Lien Waiver
VA Renovation Loans
Veterans and active-duty service members can finance repairs through VA-backed renovation loans, which allow up to 100 percent loan-to-value on a refinance with repairs included.6Veterans Benefits Administration. Circular 26-18-6 – Loans for Alteration and Repair The improvements must be typical for comparable homes in the area, and the property must meet VA minimum property requirements once the work is finished.
Unsecured Personal Loans
Personal loans don’t require your home as collateral, so you can’t lose the house if you default. That lower risk for you translates to higher risk for the lender, and the interest rate reflects it. Rates on unsecured personal loans typically run several percentage points above home equity products.
Where personal loans shine is speed and simplicity. Many lenders fund them within a few business days. No appraisal, no equity requirement, far less paperwork. For smaller projects under $15,000 to $20,000 where speed matters more than saving a point or two on the rate, a personal loan is often the most practical choice. Watch for origination fees, which some lenders charge as a percentage of the loan amount.
Any lender offering these products must provide clear written disclosures of the annual percentage rate and total finance charges before you commit.7Federal Trade Commission. Truth in Lending Act Compare the APR across offers rather than the advertised interest rate, because the APR folds in fees and gives you a truer picture of the cost.
What Closing Costs to Expect
Secured home improvement loans carry closing costs many borrowers underestimate. For home equity loans and HELOCs, expect to pay roughly 2 to 5 percent of the loan amount in fees. On a $50,000 loan, that’s $1,000 to $2,500 on top of what you’re borrowing.
Common line items include:
- Appraisal fee of $300 to $500 for a professional valuation, required on most secured products.
- Origination fee of 0.5 to 1 percent of the loan amount, charged by the lender for processing.
- Title search and insurance, which verify no other claims exist against the property and combined can run several hundred dollars.
- Recording fees charged by county offices to record the new lien.
Some lenders waive closing costs on HELOCs to attract borrowers but recover the money through higher rates or by requiring you to keep the line open for a minimum period. Ask for a full breakdown before choosing between a “no closing cost” offer and a standard one. Unsecured personal loans generally skip these costs entirely, which is part of why they stay competitive for smaller projects despite higher rates.
What Happens If You Can’t Pay
Defaulting on a secured home improvement loan goes well beyond a credit-score hit. Because the loan uses your home as collateral, the lender can start foreclosure if you stop making payments.8Federal Trade Commission. Home Equity Loans and Home Equity Lines of Credit That applies to home equity loans, HELOCs, and cash-out refinances alike.
The risk is worse with second-lien products like HELOCs. If the foreclosure sale doesn’t cover the outstanding balance, many states allow the lender to pursue a deficiency judgment for what’s left. You could lose the house and still owe money. An unsecured personal loan limits your exposure to a lawsuit and credit damage; the house stays out of it.
Before taking on secured debt for improvements, stress-test your budget. Run the numbers assuming your income drops or an unexpected expense hits. If the payment would become unmanageable under those conditions, borrow less, pick an unsecured product, or phase the renovation into stages you can handle.
Tax Treatment of the Interest
Interest paid on a home equity loan or HELOC used to substantially improve your residence can be deducted on your federal return if you itemize.9Internal Revenue Service. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses) “Substantially improve” is the operative phrase. Replacing a roof or adding a bathroom qualifies. Using the loan to pay off credit cards or take a vacation does not, even though it’s secured by your home.
The deduction applies to acquisition debt up to a dollar cap that depends on when the debt was taken on and the tax rules in effect. For 2026, prior-law limits are scheduled to return, potentially raising the cap to $1 million in qualifying debt. Rules in this area have shifted with recent legislation, so confirm the current limit with the IRS or a tax professional before relying on the deduction for a large borrowing decision.
The Section 25C Energy Efficient Home Improvement Credit, which offered up to $1,200 annually for qualifying upgrades like insulation, windows, and heat pumps, expired for property placed in service after December 31, 2025.10Office of the Law Revision Counsel. 26 USC 25C: Energy Efficient Home Improvement Credit If you completed qualifying work in 2025, you can still claim the credit on your 2025 return. For renovation work done in 2026, the credit is no longer available unless Congress enacts new legislation.