Renovation and Construction Loans



These loans are used for building a new home or for renovations on a current home. These loans cover closing costs, labor and permit fees. FHA 203k allows a loan to be taken for the renovations and the purchase of a home in a single loan versus two separate loans.


To be qualified for a FHA 203k loan, you need to meet the following requirements:

  • Provide a down payment of 3.5%
  • You need a score of at least 580.
  • Provide what renovations are being done (this ensures all your renovations are eligible under the FHA 203K loan)

If the above requirements are met, you are eligible to apply for a FHA 203K loan.


To encourage revitalization of older neighborhoods or damaged homes, FHA provides two types of loans to help home buyers reserve a portion of loan funds to accomplish non-structural and structural repairs.

A standard 203k loan is provided for properties with structural needs.

203(k) Eligible Repairs and Improvements include:

  • Repair/Replacement of roofs, gutters and downspouts
  • Repair/Replacement/Upgrade of existing HVAC, plumbing, and electrical systems
  • Minor remodeling, such as kitchens, which does not involve structural repairs
  • Exterior and interior painting, including lead based paint stabilization or abatement
  • Weatherization, including storm windows and doors, insulation, and weather stripping
  • Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers, and microwaves.
  • Improvements for accessibility for persons with disabilities.
  • Repair, replacement or the addition of exterior decks, patios and porches.
  • Basement waterproofing or remodeling which does not involve structural/sculptural repairs.
  • Window and door replacement and exterior siding replacement.
  • Well or septic system repair or replacement

Ineligible Repairs include:

Luxury items and improvements that do not become a permanent part of the real property are not eligible as a cost rehabilitation. Some examples include: barbecue pits; bathhouses; dumbwaiters; exterior hot tubs, saunas, spas and whirlpool baths; outdoor fireplaces or hearths; photo murals; swimming pools;
television antennas and satellite dishes; tennis courts; tree surgery. However, the homeowner can use the 203(k) program to finance such items as painting, room additions, decks, and other items, even if the home does not need any other improvements. Existing structural damage and foundation repairs.
A Limited 203(k) loan covers non-structural upgrades, such as painting, new counters, cabinets, patching holes, replacing doors, repair/installation of HVAC systems, and purchase/installation of new appliances.The maximum repair amount which can be financed using a Limited 203(k) loan is $35,000 with no minimum requirement for repairs.

Eligible properties for a 203(k) loan include:

  • Attached / Detatched Single Family Residential properties
  • PUDs
  • 2-4 Unit Properties
  • HUD-approved Condominiums
  • Manufactured Housing


Before applying to receive a home renovation loan, decide as best you can regarding how much money you will need to begin your home renovation. If you hire a  contractor, ask them to give you an estimate on the total cost of the home repairs. Once you have that specific number,

discuss the possibility of a home renovation loan with a mortgage broker. Different loans offer different amounts to borrowers, so talking to a mortgage broker can help determine the specific loan and amount that fits your project’s goals. For any further questions about the types of home renovation loans we offer or if you qualify for an FHA 203(k) loan, contact Lending Corner.

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Answers to Your Questions

There are a lot of factors to consider when determining how much you can afford, but a good rule of thumb is to not let your monthly mortgage exceed 25% of your monthly take-home pay. Following this guideline will help you manage additional homeownership costs such as maintenance and repairs, while still keeping room for other financial goals like retirement and savings. There are also tons of affordability calculators you can find online, like this one!

Pre-Qualification and Pre-Approval both estimate the loan amount that you are likely to qualify for. This is an important first step in the home buying process to ensure you are looking at the right homes that fit your budget.

Pre-Qualification and Pre-Approval are often used interchangeably and can both help you stand out amongst the homebuyer competition. Both require you to supply an overview of your financial history such as your income, assets, debts, and credit score. However, most people look at pre-qualification as step one and pre-approval as step two because pre-approval requires formal documentation and verification.

The amount of time it takes to close a loan will differ from lender to lender, but a top mortgage lender should be able to close your loan within 30-45 days from application. Not having the proper documentation or having errors in your documentation may result in delays so it’s important to make sure you have all of your materials properly prepared.

Mortgage lenders will require you to provide certain documents in order to assess your ability to repay your loan. The Great Recession was due in part to borrowers not being adequately vetted for their ability to repay their loans. For this reason, the pre-approval process now requires significantly more paperwork. You will be asked to provide documentation regarding your employment and income, savings and assets, and outstanding debt.

Some of these documents include:

  • Tax returns
  • Pay stubs/W-2s
  • Bank statements
  • Credit history
  • Gift letters
  • Renting history
  • Work history

Most conventional loans require at least 5% down, but 20% is typically recommended. Mortgage companies often require borrowers to pay private mortgage insurance until they have 20% equity in the home. This additional fee is put in place to protect mortgage companies against borrowers who stop making payments on time.

Although this is standard, there are also many different loan programs that can help you purchase a home with less than 5% down. For example, some Veterans can qualify for VA loans that allow them to purchase a home with 0% down and no PMI. FHA loans can also allow first time homebuyers to purchase a home with as little as 3.5% down.

Your lender will be able to assess your financial situation and determine which programs you qualify for and which ones are best for your financial goals.


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