Traditional mortgages typically only cover a home's current "as-is" value, leaving buyers to find separate funding for repairs. That's where **renovation loans** shine: they finance both the purchase (or refinance) and improvement costs based on the home's projected value after renovations.
Three popular options for Greater Boston buyers:
- FHA 203(k) Standard – For major repairs or structural work
- FHA 203(k) Limited – For minor, non-structural updates
- Fannie Mae HomeStyle Renovation – Flexible conventional alternative
Comparing Renovation Loan Options (2025 Guidelines)
| Feature | FHA 203(k) Standard | FHA 203(k) Limited | Fannie Mae HomeStyle |
| Minimum Down Payment | 3.5% | 3.5% | 5% (3% for HomeReady eligible) |
| Minimum Credit Score | 580 (500 with 10% down) | 580 (500 with 10% down) | 620–680 (varies by lender/down payment) |
| Maximum Loan Amount | FHA county limits (e.g., $806,500 low-cost areas; higher in expensive counties) | FHA county limits | Conforming limits (e.g., $806,500 most areas; up to $1.2M+ high-cost) |
| Max Renovation Budget | No specific cap (within overall loan limits; min $5,000 rehab) | $75,000 | No specific cap (within overall loan limits) |
| Allowed Renovations | Structural & major upgrades allowed (original foundation stays) | Non-structural/cosmetic only | Full range, including luxury items |
| Key Requirements | HUD consultant required; work completed in 6–12 months | No consultant needed; simpler process | Lender oversees; completed within 12 months |
Other Things to Know
Renovation loans often have slightly higher interest rates (0.125–0.25% above standard mortgages) and may include mortgage insurance (FHA loans require it). Many allow up to 6 mortgage payments to be escrowed while you can't occupy the home during major work.
Closing can take 60–90 days (vs. 30–45 for standard loans) due to bids, appraisals, and oversight. You'll need detailed contractor bids—the appraiser uses these to estimate post-renovation value. DIY labor is allowed on some programs, but you can't pay yourself from loan funds.
These loans are powerful tools for turning a fixer-upper into your dream home. Talk to lenders experienced with renovation financing to find the best fit for your project!
