Renovation Loans: FHA 203k and Fannie Mae HomeStyle Explained

What if you could buy a property that needs work and finance both the purchase price and the renovation cost in a single mortgage? Renovation loans make this possible — and they are one of the most underutilized products in residential lending.

FHA 203k: The Standard and Limited Versions

The FHA 203k loan is available in two forms. The Standard 203k handles major structural renovations including room additions, foundation work, and significant system replacements. There is no minimum repair amount and no maximum beyond the FHA loan limit for the area.

The Limited 203k — formerly Streamlined — handles non-structural improvements up to $35,000. Faster and simpler to close than the Standard version. Eligible for cosmetic and mechanical upgrades but not structural changes.

Both versions require an FHA-approved consultant to oversee the renovation for the Standard 203k. Both require FHA standard eligibility: 3.5% down for 580+ credit, standard DTI, primary residence occupancy.

Fannie Mae HomeStyle

The HomeStyle Renovation loan is a conventional product — no FHA upfront MIP, broader property eligibility, available for primary residences, second homes, and investment properties.

Renovation costs up to 75% of the as-completed appraised value can be financed. No list of prohibited improvements — virtually any renovation qualifies. Requires a licensed contractor and draws are managed through a renovation escrow account.

How Renovation Escrows Work

In both programs, renovation funds are held in escrow and released in draws as work is completed and inspected. You do not receive the renovation funds directly — they flow to the contractor against completed milestones.

At East Coast Mortgage, we structure 203k and HomeStyle renovation loans for primary residence buyers. Submit your scenario and we will evaluate whether a renovation loan is the right fit for your purchase.