When Buying a House, Can You Borrow More for Renovations?

Yes. When you’re buying a house, you can borrow more than the purchase price to pay for renovations by using a renovation mortgage, which rolls the acquisition cost and the projected repair budget into a single loan that closes once. The main programs are the FHA 203(k), Fannie Mae’s HomeStyle, Freddie Mac’s CHOICERenovation, and a renovation feature available through some VA-backed loans. Each sets its own rules for how much extra you can borrow, what work qualifies, and how long you have to finish.

The Four Programs and Who Each Fits

The FHA 203(k) is the most accessible renovation mortgage because it accepts lower credit scores and smaller down payments than the conventional alternatives. It comes in two versions. The Limited 203(k) covers up to $75,000 in repairs and is designed for cosmetic or moderate upgrades that don’t involve major structural work.¹ The Standard 203(k) handles bigger projects with no dollar ceiling beyond the area’s FHA loan limit, but the repair budget must be at least $5,000, and HUD requires you to work with an approved consultant who oversees the scope and inspections.² The minimum down payment is 3.5% of the total loan amount with a 580 credit score, or 10% down with scores between 500 and 579. Many lenders impose their own minimums of 620 or higher.

Fannie Mae’s HomeStyle Renovation mortgage is the main conventional option. Its biggest advantage is flexibility in what you can renovate: the program covers any permanently attached improvement, including swimming pools and outdoor kitchens that FHA prohibits.³ First-time buyers can put as little as 3% down on a fixed-rate loan, and private mortgage insurance drops off once you reach 20% equity, unlike FHA’s mortgage insurance which often lasts the life of the loan.⁴

Freddie Mac’s CHOICERenovation works similarly to HomeStyle but adds explicit support for energy-efficiency upgrades and improvements that make a home more resilient to natural disasters, such as storm-rated roofing or flood-resistant foundations.⁵ Both conventional programs require a minimum 620 credit score.⁶

Veterans, active-duty service members, and eligible surviving spouses can use a VA-backed loan to purchase and renovate a primary residence with no down payment.⁷ The VA does not operate a standalone renovation loan; participating VA-approved lenders offer renovation features within the standard VA framework. Most lenders cap the renovation portion at around $50,000, though some go up to $75,000. VA loans carry no monthly mortgage insurance but do require a one-time funding fee: 2.15% of the total loan amount for first-time use with no down payment, dropping to 1.5% with 5% down and 1.25% with 10% or more down. Veterans with a service-connected disability are exempt.⁸

Loan-size ceilings still apply. For 2026, FHA’s single-family loan limit ranges from $541,287 in standard-cost areas up to $1,249,125 in high-cost markets.⁹ The 2026 conforming limit for a single-family home is $832,750 in most of the country and $1,249,125 in high-cost areas.¹⁰ Your purchase price plus renovation budget, contingency reserves included, has to fit inside the limit for your county.

How Much Extra You Can Actually Borrow

Renovation loan amounts are not based on what the house is worth today. They’re based on its projected “as-completed” value once the planned work is finished. An appraiser reviews the contractor’s plans and compares the improved property to recent sales in the area to estimate the finished value. That number drives everything else.

For FHA 203(k) loans, you can borrow up to 96.5% of the lesser of two figures: the as-completed appraised value, or the purchase price plus total renovation costs.² Conventional HomeStyle loans follow the same logic, with the maximum LTV reaching 97% for qualifying first-time buyers on a fixed-rate loan.⁴

Your loan total also includes a mandatory contingency reserve. For a Standard 203(k), the reserve ranges from 10% to 20% of the repair budget depending on the home’s age and condition. Homes 30 years or older require a minimum 15% contingency if the utilities are not currently working; newer homes start at 10%.¹¹ That cushion sits in escrow to cover surprises like hidden water damage or outdated wiring that only appears once walls are opened. If it isn’t needed, the unused funds get applied to your loan principal at the end of the project.

A worked example. Say you’re buying a home for $200,000 that needs $60,000 in repairs. Add a 15% contingency of $9,000 and your total project cost is $269,000. If the appraiser values the finished home at $280,000, you can borrow up to 96.5% of $269,000 on an FHA 203(k), which is roughly $259,585. Your 3.5% down payment covers the rest.

What Work Qualifies

The range of eligible improvements varies sharply by program. FHA 203(k) loans cover structural repairs, room additions, kitchen and bathroom remodels, accessibility modifications, new roofing, plumbing and electrical upgrades, and energy-efficiency improvements. They do not cover anything HUD classifies as a luxury. Swimming pools, hot tubs, outdoor kitchens, and similar amenities are off the table.¹ The Limited 203(k) adds a further restriction by excluding major structural changes.

Conventional programs are more permissive. HomeStyle allows any renovation that is permanently affixed to the property, including the luxury items FHA prohibits.³ CHOICERenovation adds eligibility for resilience upgrades such as impact-resistant windows and foundation reinforcement.⁵ If your plan centers on a pool or elaborate outdoor space, conventional is the only path.

The property itself also has to qualify. FHA 203(k) accepts single-family homes, two- to four-unit buildings (as long as you live in one unit), eligible condos, manufactured homes titled as real estate, and mixed-use properties that are at least 51% residential.² The property must be at least one year old.

Deadlines and What Happens If You Miss Them

Every renovation loan comes with a clock. FHA 203(k) loans require all work to be finished within six months of closing.¹² That is tight for major structural work, so check your contractor’s timeline before you commit to a Standard 203(k).

HomeStyle loans are more generous, allowing up to 15 months from closing. In unusual circumstances, Fannie Mae may grant a limited extension not exceeding 18 months total, but the lender has to report the delay and Fannie Mae decides whether to allow it.¹³

If you blow past the deadline, the lender can freeze the remaining draw payments. Without those funds the project stalls, the property sits unfinished, and you keep making mortgage payments on a home you may not be able to occupy. In extreme cases, failing to complete the renovation can constitute a loan default.

Occupancy and Investment Property Limits

FHA 203(k) loans are strictly for primary residences. You must move in within 60 days of the renovation’s completion and live there as your main home. A 203(k) can’t be used on a vacation property or a rental you don’t occupy.²

Conventional programs are more flexible. HomeStyle allows renovation financing on single-unit investment properties and second homes in addition to primary residences of up to four units.³ CHOICERenovation covers primary residences of one to four units, one-unit second homes, and one-unit investment properties.⁵ If you’re buying a rental that needs work, conventional renovation loans are essentially your only option. Expect higher down payment requirements and interest rates for non-owner-occupied properties.

Costs You’ll Pay Beyond the Mortgage Itself

FHA 203(k) loans carry two layers of mortgage insurance. An upfront mortgage insurance premium of 1.75% of the base loan amount is due at closing and typically rolled into the loan balance. On top of that, you’ll pay an annual premium split into monthly installments. FHA mortgage insurance generally lasts the life of the loan unless you refinance into a conventional mortgage after building 20% equity.

Conventional HomeStyle and CHOICERenovation loans require private mortgage insurance only when the down payment is less than 20%. Conventional PMI cancels automatically once you reach 78% LTV based on the original value, or you can request removal at 80%. Rates depend on your credit score, LTV, and loan size, but for borrowers with credit scores above 720 the premium is typically lower than FHA’s.

Renovation loans also add several costs a standard purchase mortgage doesn’t. The as-completed appraisal costs more than a standard appraisal. Title updates may be needed during and after construction. HUD consultant fees apply to Standard 203(k) loans. Draw inspection fees accumulate with each milestone payment, usually a few hundred dollars per inspection on a single-family property. And the contingency reserve, while protective, means you’re paying interest on money that may never be spent on actual improvements.

Documentation, Contractors, and How the Money Gets Released

Renovation loans require substantially more paperwork than a standard purchase mortgage. The centerpiece is the scope of work: a detailed breakdown of every planned repair, the materials involved, and the labor cost for each task. Your contractor prepares this on company letterhead with a clear timeline. For a Standard 203(k), the HUD consultant independently reviews the property, identifies all necessary repairs, and creates a formal work write-up that the contractor then prices. This adds time up front but protects you from underbidding. The Limited 203(k) skips the HUD consultant, which speeds things up but shifts more responsibility to you to catch scope gaps.

Lenders also require proof that the contractor holds an active state license and carries liability insurance. Structural changes usually need architectural drawings. Building permits are your responsibility to obtain before work begins, and many lenders want to see approved permits in the file before closing. Permit fees can be rolled into the loan.

Closing looks like a regular purchase, with one key difference: the renovation funds don’t go to the seller. The purchase portion pays the seller at closing, and the renovation money goes into a dedicated escrow account controlled by the lender.¹⁴ The contractor gets paid through a draw schedule as work progresses. At each milestone the contractor requests a draw, and the lender sends an inspector (or, for Standard 203(k) loans, the HUD consultant) to verify the work matches the approved scope before releasing funds. Draw inspections typically happen monthly.

The staged payment system means your contractor has to be comfortable waiting for draw approvals rather than receiving large upfront payments. A contractor unwilling to work under a draw schedule is a warning sign for a renovation loan project, and lining up someone experienced with these programs before you apply is the difference between a smooth closing and months of delay.

1
U.S. Department of Housing and Urban Development. 203(k) Rehabilitation Mortgage Insurance Program Types
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U.S. Department of Housing and Urban Development. 203(k) Rehabilitation Mortgage Insurance Program
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Fannie Mae. HomeStyle Renovation Mortgages Loan and Borrower Eligibility
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Fannie Mae. Eligibility Matrix
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Freddie Mac. CHOICERenovation Mortgages
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Fannie Mae. General Requirements for Credit Scores
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Veterans Affairs. Purchase Loan
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Veterans Affairs. VA Funding Fee and Loan Closing Costs
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U.S. Department of Housing and Urban Development. HUD Federal Housing Administration Announces 2026 Loan Limits
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FHFA. FHFA Announces Conforming Loan Limit Values for 2026
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U.S. Department of Housing and Urban Development. Standard 203(k) Contingency Reserve Requirements
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Office of the Comptroller of the Currency. FHA 203(k) Loan Program Community Developments Fact Sheet
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Fannie Mae. HomeStyle Renovation Mortgages
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HUD. 203(k) Rehabilitation Mortgage Insurance Program Consumer Fact Sheet