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Fixer-Upper Loans: Best Options for 2022

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If you’re buying a house that needs some TLC, a fixer-upper loan can be a good option to pay for the work it needs to become your dream home. These loans offer you enough money to buy the home and complete a renovation. There are several different fixer-upper loans available, depending on your circumstances. We’ll go over some of the best ways to finance a fixer-upper in this article.

6 fixer-upper loan options

Fixer-upper loans — also commonly known as renovation loans — typically offer you enough money to buy a new home and fix it up, based on how much it’s expected to be worth after the renovation. Each fixer-upper loan program will have its own criteria for qualification.

Fannie Mae HomeStyle renovation loan

Fannie Mae HomeStyle renovation loans allow you to borrow up to 97% of the cost of your fixer-upper project, leaving you with a low 3% down payment. The amount you can borrow is based on either the cost of the renovation or the expected value of the home after the renovation, whichever is lower. These loans can be used for a wide range of projects, from critical repairs and energy upgrades to landscaping and luxury projects.

Things you should know

In most cases, you’ll need to choose a general contractor for the renovation, and fully plan out all of the work to be done before closing on the loan. However, you can do some of the work yourself, provided it doesn’t amount to more than 10% of the property’s value.

You’ll need a minimum 620 credit score to qualify. HomeStyle renovation loans are available as 30- or 15-year fixed-rate mortgages, or as an adjustable-rate mortgage (ARM).

Freddie Mac CHOICERenovation loan

Freddie Mac’s CHOICERenovation loans allow you to finance both the purchase and renovation cost of a home, with a down payment as low as 3% in some cases. You can also use these loans to fix up your current home through a refinance.

The loan amount is based on the cost of the home and renovations, or the expected appraised value of the home after renovations — whichever is lower. Renovations must be completed within a year of closing on the loan.

Freddie Mac requires a 620 minimum credit score.

Freddie Mac CHOICEReno eXPress loan

For smaller fixer-upper projects, Freddie Mac’s CHOICEReno eXPress loan is a streamlined version of its renovation mortgage. The renovation cost must be below 10% or 15% of the value of the home, depending on where you live, and down payments can be as low as 3%. While the CHOICERenovation loan requires preapproval from Freddie Mac, the eXPress loan does not — making it easier for lenders to approve you for the mortgage.

You’ll need a minimum 620 credit score to qualify for a Freddie Mac mortgage.

FHA 203(k) loan

The FHA 203(k) loan program insures mortgages made by FHA-approved private lenders to cover the cost of buying the property and fixing it up. You can also refinance with a 203(k) loan to renovate your current home. Renovation costs must be at least $5,000. The home’s value must be below the FHA loan limit in your area, which is $420,680 in most places for a single-family home in 2022, but up to $970,800 in high-cost areas.

Things you should know

For standard 203(k) loans, you’ll need to use an approved 203(k) consultant to help plan the project. These consultants have experience as home inspectors, contractors, architects or engineers, and will review or prepare plans for the renovation and estimate the costs. For smaller renovations — under $35,000 in most places — you won’t need to use a consultant. Unlike other renovation loans, you can use a 203(k) loan for a tear-down, as long as the foundation remains in place.

The guidelines to qualify for an FHA fixer-upper loan are the same as other FHA loans, including a minimum 500 credit score if you can make a 10% down payment, or 580 score for a 3.5% down payment.

VA renovation loan

VA loans are a benefit to military service members and veterans, offering the ability to buy a home with no down payment — and VA renovation loans are no exception. These loans allow service members and veterans to buy a home and finance the cost of fixing it up, up to 100% of the expected value of the home after renovation.

Just like any other VA loan, you’ll need to prove that you qualify through a certificate of eligibility from the U.S. Department of Veterans Affairs (VA). In addition, there is no minimum credit score — instead, lenders will review your entire financial picture to see if you’re able to pay back the mortgage.

USDA renovation loan

USDA loans allow people living in rural areas to purchase a home and finance the cost of renovations and repairs with one loan closing. No down payment is required; the loan can finance up to 100% of the expected value of the home after it’s fixed up.

Loan proceeds can be used for home improvements like upgrading kitchens and bathrooms, accommodating the needs of people with disabilities, putting in an addition, making structural changes or installing energy-efficient features. There are no minimum repair costs, but the maximum is $35,000. You can also use these loans to raze an existing home and build a new one on the same foundation.

Things you should know

You must fall below the USDA’s income limits to qualify. There is no minimum credit score, but you’ll have to show you can afford to pay back the mortgage.

How to buy a fixer-upper

The process of buying a fixer-upper is similar to buying a traditional home, but there are a few wrinkles. Here’s how to move forward.

1. Research your options

Carefully consider the different types of renovation loans available and which one(s) might work best in your situation. Now is also a good time to evaluate a few different lenders to see what offerings they have and the service they provide.

2. Get preapproved for a loan

Most lenders allow you to fill out a form online to be preapproved for a loan. You’ll be able to determine the amount you’re likely to be able to borrow and the interest rate you would receive.

3. Put together a budget

Just because you’re approved for a certain amount doesn’t make it a good idea to borrow that much. Look at your monthly obligations and see what size monthly payment will fit comfortably in your finances. Don’t forget to factor in a little extra, in case renovation costs exceed what you’ve planned.

4. Shop for a home

Once you know your price range, you can start house-hunting. You may consider working with a real estate agent who can help you identify homes that fit your criteria. They can also likely help you figure out how much the home is likely to be worth once it’s fixed up.

5. Get a home inspection

It’s always a good idea to hire a home inspector before purchasing a house, but it’s even more crucial when you’re buying a fixer-upper. Home inspectors can help identify problem areas that will need to be addressed.

6. Put together a renovation plan

Many renovation loan programs require you to put together a construction plan before being approved for the mortgage. You may want to hire a contractor who can walk the property during the due diligence period and help determine the costs of completing the projects you have in mind.

7. Apply for your fixer-upper loan

Once you’ve found the best lender for your situation, chosen a home and put together your renovation plan, you’re ready to apply for your mortgage. After you’ve been preapproved, a loan officer will be able to help guide you through the process. You’ll likely need to provide more documents laying out your income and assets to prove you can afford the loan.

8. Close on the loan

Fixer-upper loan programs generally have just one closing for the mortgage and renovation costs. Your lender will let you know how much cash you’ll need to close and will give you details on how to access the money for the renovation.

9. Manage construction

Depending on the extent of the renovations, you may want to hire a general contractor to oversee the project. If not, you’ll need to hire subcontractors who will perform the work under your supervision.

10. Move in!

When the renovation is complete, your fixer-upper will be ready for you to live in.

Pros and cons of buying a fixer-upper

Buying a fixer-upper can be a great way to own the home of your dreams, but it also has challenges.


  You can customize your renovation. As you plan your project, you can make sure the upgrades are exactly what you want.

  You can finance repairs in one loan. The fixer-upper loans we’ve discussed let you finance the cost of buying the home and fixing it up with one closing. You won’t need to apply for a home equity loan or another type of loan to pay for your renovation.

  You may build equity more quickly. When buying a fixer-upper, you may be able to get the property for less than other homes nearby. After you fix it up, you may find yourself with a significant amount of equity if your improvements have boosted the home’s value.


  Your costs could go up after closing. Renovation projects often come in over budget. As such, you may find yourself paying more out of pocket than you planned if change orders or other difficulties arise during the renovation process.

  You might not be able to move in right away. If you’re completing an extensive renovation, you might not be able to live in the home while work is underway. This means you may need to pay for other living expenses as well as your new mortgage for a period of time.

  You’ll have to deal with contractors and inspectors. For many of the renovation loan programs, you must work with a licensed contractor — adding complexity to your move. You’ll also likely need to get inspections from your local government to make sure the work was done properly.

Is buying a fixer-upper a good investment?

Taking on a major renovation project is not for the faint of heart. If you’re thinking about a fixer-upper mortgage, here are a few things to consider before making your decision.

  Do I have a vision for the project? Renovations involve a lot of choices. Think about whether you’re ready to work on a design for your new home, or if you’d rather pick one that’s move-in ready.

  Do I qualify for the loan? Take a look at your credit report, which you can request for free on and monitor your credit score. If your score falls below the minimum threshold for the loan program you’re considering, take some time to pay down debt or focus on making on-time payments on your current obligations.

  Will I have somewhere to live during construction? Unless you’re only making cosmetic changes, you’ll likely need a place to stay while your fixer-upper is under construction. This adds to your costs and makes the process of moving into your new home more challenging.

  Do I have wiggle room in my budget? Construction projects don’t always go according to plan. You’ll want to make sure there’s a little flexibility in your financial picture to cover cost overruns, should they occur.

  What other financing options do I have? Renovation loans can be a convenient option for fixer-uppers, but they’re not the only one. Especially if the renovation isn’t crucial to make the home livable, you might consider options like home equity loans, contractor financing or simply saving enough money to complete your project with cash.


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