Buy the house with potential, and finance the repairs with it.
A fixer upper can be a smart buy, but a regular mortgage only pays for the house as it is. Renovation loans let you finance the purchase and the repairs together. Ken Clark Jr. helps buyers in Sacramento, New Jersey, and nationwide where PRMG is licensed compare FHA 203(k), HomeStyle, and investor fix and flip options.
Short answer: a loan that finances the purchase of a home that needs work plus the cost of repairs, usually sized on the home's value after the renovation.
A standard purchase loan is based on the home as it is today and does not include money for repairs. If the house needs a roof, a kitchen, or new systems, you would pay for that out of pocket after closing. A renovation loan rolls it into one loan with one closing, then pays your contractor in draws as work is completed. Overview: renovation loans.
Short answer: three main paths: FHA 203(k), Fannie Mae HomeStyle, and business-purpose fix and flip loans for investors.
| FHA 203(k) | HomeStyle Renovation | Investor fix and flip | |
|---|---|---|---|
| Who it fits | Owner-occupants, including first-time buyers | Owner-occupants with stronger credit; second homes and investors | Investors buying to renovate and resell |
| Financing | As little as 3.5% down at 580+ for eligible borrowers | Up to 97% LTV on eligible one-unit primary fixed-rate loans | Commonly up to about 90% of purchase and 100% of rehab, capped around 75% of ARV |
| Renovation limits | Limited up to $75,000; Standard $5,000 minimum, within FHA limits | Up to 75% of the lesser of price plus renovation or as-completed value | Based on the project and after-repair value |
| Term | Long-term mortgage | Long-term mortgage | Commonly 12 to 24 months, interest-only |
| Occupancy | Primary residence | Primary, second home, investment | Non-owner-occupied only |
| Mortgage insurance | FHA mortgage insurance | PMI if under 20% equity, cancellable | Not applicable |
Deep dives: FHA 203(k), HomeStyle, 203(k) vs HomeStyle, and fix and flip loans.
Short answer: it depends mostly on whether you will live there, your credit, and the size of the project.
Short answer: add the purchase price, renovation bids, and a contingency, and compare that total with the likely as-completed value and the program limits.
Try the renovation loan finder or our calculators.
Educational illustration only. Not an actual client, loan offer, or commitment to lend.
A dated 1970s three-bedroom lists at $380,000 and needs $70,000 of roof, HVAC, kitchen, and flooring work. The as-completed value is estimated at $490,000. Buyer A will live there, has a 620 score, and modest savings: a Limited 203(k) may fit, with 3.5 percent down. Buyer B will live there with a 740 score: HomeStyle may fit, with PMI that can be cancelled later. Buyer C is an investor planning to resell: a business-purpose fix and flip loan with interest-only payments over a 12-month term may fit, subject to the ARV cap and underwriting.
Short answer: hidden conditions, timelines, contractor paperwork, and wish-list items that are not eligible.
Where available: PRMG renovation programs are available in every state where PRMG is licensed, which is all states except New York, including California and New Jersey, for eligible borrowers and subject to underwriting and program guidelines.
Answered by Ken Clark Jr., Certified Mortgage Advisor. Program availability and requirements vary and are subject to change.
A renovation loan that finances the purchase of a home plus the cost of repairs, usually sized on the value after the work.
Yes, with an FHA 203(k), which allows as little as 3.5 percent down with a 580 or higher score for eligible borrowers, for a primary residence.
Yes. Fannie Mae's HomeStyle Renovation loan is a conventional option that also allows second homes and investment properties.
It depends on whether you will live there, your credit, down payment, and the size of the project. FHA 203(k) and HomeStyle serve homeowners; fix and flip loans serve investors.
Up to $75,000 on a Limited 203(k); more on a Standard 203(k) within FHA limits; HomeStyle renovation costs up to 75 percent of the lesser of price plus renovation or as-completed value.
Yes, with HomeStyle for some investment properties or a business-purpose fix and flip loan. The 203(k) requires a primary residence.
No. The funds are held and paid to the contractor in draws as work is completed and inspected.
Plan on hiring a contractor. PRMG HomeStyle does not allow do-it-yourself work, and 203(k) work is contractor-driven.
Usually longer than a standard purchase, because bids, the as-completed appraisal, and sometimes a consultant are required.
Yes. PRMG renovation programs are available in every state where PRMG is licensed, which is all states except New York, subject to eligibility and program guidelines.
Guidelines change. Verify current program requirements with Ken Clark Jr. before relying on them for a transaction.
Disclaimer: This content is for educational purposes only and is not a commitment to lend, a guarantee of approval, or a rate quote. Loan programs, down payment requirements, terms, and eligibility depend on borrower, property, project, builder, and program qualifications, are subject to underwriting, and vary by state. Not all applicants or projects will qualify. Builder registration is a documentation review for program eligibility and is not an endorsement of any builder. Business-purpose loans are for non-owner-occupied investment properties only and are not consumer mortgage loans. Equal Housing Opportunity. Paramount Residential Mortgage Group, Inc. (PRMG), NMLS #75243. Ken Clark Jr., NMLS #225375. PRMG is licensed in 49 states, excluding New York.
Certified Mortgage Advisor and Branch Manager at PRMG Mortgage (NMLS #75243). 28 years in mortgage lending. Specializes in FHA, VA, conventional, DPA, jumbo, Non-QM, renovation, and construction financing for buyers and investors in Sacramento, New Jersey, and nationwide. PRMG is licensed in 49 states, excluding New York. Three-time Gold Award winner for Highly Reviewed Mortgage Team in Sacramento (2023, 2024, 2025). NMLS #225375.
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