A renovation loan lets you finance the purchase price and the cost of repairs in one mortgage, which can help when a home needs work that a standard loan would not cover. The two best-known programs are the FHA 203(k) and Fannie Mae HomeStyle. One lender-education source reports that the 203(k) allows credit scores as low as 500 (with a larger down payment at lower scores) and is limited to primary residences, while HomeStyle generally requires a 620 score and allows more property types, with renovation costs capped at 75% of the projected value after repairs. Some luxury items, like pools and hot tubs, are generally not eligible under the 203(k). Requirements vary by lender and change, so talk to a lender who offers these loans early, before you make an offer.
What Is a Renovation Loan?
A renovation loan combines the home purchase and repair costs in one mortgage. The loan amount is based on the home's projected value after the work is done. The money for repairs is generally held and released as work is completed, rather than handed over all at once. Ask your lender exactly how funds are released and whether an inspection or consultant is required.
How Do the Two Main Programs Compare?
The comparison below reflects one source. Lender rules can be stricter.
FHA 203(k) | Fannie Mae HomeStyle | |
|---|---|---|
Minimum credit score | Reported as low as 500 | Reported 620 |
Down payment | Reported about 3.25% to 3.5% at higher scores; 10% at lower scores | Reported as low as 3% |
Property types | Primary residences only | Primary residences, and in some cases second homes and investment properties |
Renovation limits | Cannot fund luxury items like pools, hot tubs, and outdoor fireplaces | Renovation cost generally cannot exceed 75% of the projected value after repairs |
DIY work | Ask your lender | Limited |
Down payment minimums and credit score rules are set by lenders and loan programs, and they can change. Ask for current terms.
Is a Fixer-Upper Right for Me?
A fixer-upper can make sense if you have time, a budget cushion, and the patience to manage a project. It can be a poor fit if you need to move in quickly, or if you are unsure what the repairs would cost. Costs often run over estimates, so build in a cushion.
What Should I Check Before Making an Offer on a Fixer-Upper?
- Get a thorough inspection, including the roof, plumbing, electrical, and air conditioning.
- Get contractor bids before you commit, from licensed contractors. You can verify a contractor's license with the Nevada State Contractors Board.
- Ask about permits. Unpermitted work can create problems later.
- Ask your lender about the appraisal, which is based on the projected value after repairs.
- Check the HOA rules on exterior changes, if the home has an HOA.
- Plan your living situation during the work, since some projects take months.
Are There Other Ways to Pay for Repairs?
- Negotiate a price reduction or a closing credit after an inspection.
- Ask the seller to make repairs before closing.
- Use savings, a home equity loan or line of credit after purchase, or other financing. Compare the costs.
- Buy and fix in stages, with urgent safety items first.
Local Context: Older Homes in the Las Vegas Valley
Homes built decades ago may need updates to wiring, plumbing, air conditioning, or the roof, and sun and heat can age exteriors. A fixer-upper may sit at a lower price than a similar updated home, but the total cost after repairs matters most. Ask your agent for comparable updated sales to see whether the numbers make sense.
Related Reading
Our post on what to do when your inspection report looks scary explains how to sort findings, and our post on how old the air conditioner is covers a major repair cost to check.
This post reflects general information as of publication and is not legal or financial advice. Loan program rules, limits, and lender requirements change and vary. Confirm current terms with a licensed lender and hire licensed contractors. Speak with Sherwyn or Ferguz Colonia about buying in the Las Vegas Valley.
Sherwyn Colonia, NVRE License #S.185645 | Ferguz Colonia, NVRE License #S.199036 FIV Realty | (702) 234-5985 | thecoloniateam.com This is not intended to solicit properties currently listed for sale. Equal Housing Opportunity. All information deemed reliable but not guaranteed. We are committed to compliance with the Fair Housing Act and the Nevada Real Estate Division's licensing and advertising regulations. Sherwyn and Ferguz Colonia help buyers weigh repair projects across the greater Las Vegas Valley.
