The Differences Between Homestyle & 203(k) Renovation Loans

Two Types of FHA 203(k) Loans

The FHA 203(k) mortgage program has two main versions — standard and limited (also called streamline). The program is only available for a borrower’s primary residence, so this mortgage loan cannot be used for investment property. 

A limited FHA 203(k) is a loan option for minor renovations that don’t impact habitability during work. Eligible projects include installing appliances, flooring, exterior upgrades like deck repair, and painting. Limited FHA 203(k) loans are capped at $35,000 in renovation costs.

A standard FHA 203(k) is a loan option that offers flexibility — it can finance structural repairs like additions, roof replacement, and major remodeling. Standard FHA 203(k) loans allow for more than $35,000 in repairs, which differs from the limited FHA 203(k) loans, which are capped at $35,000. If a project exceeds 3 months, a standard FHA 203(k) is required to pay for renovation costs. 

Your loan officer will give you guidance on which FHA loan program should be used based on your home usage and renovation needs. Your loan officer should provide you with an estimate of any up-front closing costs, your monthly payments, and your loan options.

Fannie Mae Homestyle vs. FHA 203(k) Loans

While FHA 203(k) is an FHA loan option, Fannie Mae Homestyle loans are conventional mortgages. So the first key difference between the programs is their separate borrower eligibility requirements. Beyond borrower eligibility, here are other key differences between Fannie Mae Homestyle and FHA 203(k) loan options: 

The different loan programs for borrowers, such as FHA or Fannie Mae Homestyle, need to be discussed with your mortgage lender in order to determine whether an FHA loan or conventional loan is the most desirable option. Your new mortgage payments will also be a key consideration when financing your renovation project.

Remember: an FHA loan can only be used if the property is your primary residence. 

VA Renovation Loan Option

If you’re a veteran or active service member, a VA loan may be your best bet. VA home loans offer benefits like zero down payment and no mortgage insurance requirements from the lender. VA home renovation loans have specific criteria:

• All home renovation work must be completed within 120 days of closing.
• Home renovations must improve safety and usability — cosmetic upgrades may not qualify.
• The home must meet VA minimum property standards upon completion.

So, Are Home Renovation Loans Right for You?

The optimal loan depends on your finances, the scope of your renovation project, and borrower eligibility. I recommend contacting multiple lenders to find the best home renovation program for your needs and home vision.

Loan terms and interest rates vary between lenders, so comparing several is the key to getting the right match for your project. 

As a borrower, consider the renovation project and determine which upgrades are must-haves versus those you could potentially save up for and complete later. Look at total renovation costs compared to your available funds and your home equity when deciding if an FHA, Fannie Mae Homestyle, or VA renovation loan makes sense for your situation. 

Home renovation loans can certainly allow for convenient upgrades, but they also add costs to your mortgage and monthly payments. In my experience, these loan programs are a good choice for obtaining renovation financing versus an unsecured loan with higher interest rates and loan costs. 

I recommend discussing your specific home renovation plans with lenders to learn about their available loan programs. Look at options from both local banks and national lenders to find the best rates and terms. Consult multiple loan officers to compare options side-by-side based on your financial situation, credit, required repairs, and timeline. With the right renovation loan, you can begin to enjoy the stylish upgrades and improvements you’ve made to your home.