Complete Renovation Loan Guide
Written by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A renovation loan rolls the cost of repairs or remodeling into your mortgage, so you can buy a home that needs work and fix it with one loan. It is a powerful tool in Florida, where many affordable homes need updates.
This guide covers FHA 203(k), conventional renovation loans, and how the draw process works. Mortgage Capital, NMLS# 1859012, helps Florida buyers finance both the home and its improvements together.
How renovation loans work
Instead of two loans, a renovation loan combines the purchase price and the cost of improvements into a single mortgage based on the home's projected value after the work.
This lets you buy a dated home, modernize it, and finance everything at one rate, rather than paying cash or using high-interest credit for the upgrades.
FHA 203(k) loans
The FHA 203(k) comes in two forms. The limited version covers smaller projects up to a set cost, while the standard version handles major structural work and larger budgets.
With 3.5% down and FHA's flexible credit, a 203(k) is a popular way for Florida buyers to take on a fixer-upper.
Conventional renovation loans
Fannie Mae HomeStyle and Freddie Mac CHOICERenovation loans are the conventional equivalents. They allow a wider range of projects, including luxury items, and avoid lifelong mortgage insurance.
They suit buyers with stronger credit who want more flexibility than the FHA 203(k) allows.
The draw and contractor process
Renovation funds are held in escrow and released in draws as work is completed and inspected. You hire licensed contractors and submit bids before closing.
This structure protects you and the lender by tying payments to finished, inspected work rather than releasing all the money up front.
Florida renovation considerations
In Florida, roof replacement, hurricane shutters, and impact windows are common renovation targets that also lower insurance. Permitting and licensed-contractor rules apply.
Budget realistically and include a contingency. We help structure the loan so the scope, bids, and timeline line up with the lender's requirements.
Complete Renovation Loan Guide: step by step
Frequently asked questions
What is a renovation loan?
A mortgage that combines the home's purchase price and the cost of improvements into one loan based on the after-renovation value.
What is an FHA 203(k) loan?
An FHA renovation loan with two versions: a limited one for smaller projects and a standard one for major work, both at 3.5% down.
What is the difference from a conventional renovation loan?
Conventional HomeStyle and CHOICERenovation loans allow more project types and avoid lifelong mortgage insurance, but need stronger credit.
How are renovation funds released?
They are held in escrow and paid in draws as licensed contractors complete and pass inspection on each stage of work.
Can I do the work myself?
Generally no. Most renovation loans require licensed contractors, especially for structural and permitted work.
Can I include a new roof or impact windows?
Yes. These are common Florida projects that also reduce insurance and are eligible under renovation loans.
How much down payment do I need?
3.5% on an FHA 203(k) or as little as 3% to 5% on conventional renovation loans, based on the after-renovation value.
Do I need extra time to close?
Renovation loans can take a bit longer because of the bid and inspection requirements. Plan accordingly.