Renovation loans are specialized home loans that combine the cost of buying (or refinancing) a property with the funds needed for repairs or upgrades. Instead of juggling a separate mortgage and a home improvement loan, you can simplify the process with one solution.

Both the FHA 203(k) and CHOICERenovation® offer this combined approach, but they do so in slightly different ways.

The FHA 203(k) is a government-backed renovation loan insured by the Federal Housing Administration (FHA). It’s designed for buyers and homeowners who want to purchase or refinance a property and roll in the costs of repairs or improvements.

Key features of FHA 203(k):

• Low Down Payment: Down payments as low as 3.5% for qualified buyers.
• Flexible Credit Requirements: More lenient credit score standards than many conventional loans.
• Wide Range of Eligible Repairs: Can be used for everything from basic repairs and upgrades to major structural renovations.
• Limited and Standard Options: The Limited 203(k) is designed for projects under $75,000 that don’t involve structural changes, while the Standard 203(k) covers larger, more complex renovations.

Keep in mind: FHA 203(k) loans are only available for primary residences.

The Freddie Mac CHOICERenovation® loan is a conventional mortgage that allows borrowers to finance the cost of home improvements along with a home purchase or refinance. This program is designed to offer greater flexibility for a range of renovation needs.

Key features of CHOICERenovation®:

• Flexible Property Types: Can be used for primary residences, second homes, and investment properties.
• Conventional Financing: May offer lower mortgage insurance costs and more favorable terms for buyers with stronger credit.
• Broad Scope of Renovations: Funds can be used for repairs, cosmetic updates, energy efficiency improvements, and even renovations to help a home better withstand natural disasters.
• Choice for Both Purchase and Refinance: Available for both buying a new home or refinancing your current one with added renovation funds.

Keep in mind: Borrowers typically need a higher credit score than with FHA 203(k), and down payment requirements can vary. Some repairs may need pre-approval, and working with an experienced lender can help simplify the process.

Want to talk through your renovation options? Contact a US Lending Company Loan Officer today.

Here’s a quick side-by-side look at the key differences:

Occupancy:

• FHA 203(k): Only for primary residences.
• CHOICERenovation®: Available for primary, secondary, and investment properties.

Down Payment:

• FHA 203(k): As low as 3.5%.
• CHOICERenovation®: Often starts at 5% (can vary).

Credit Requirements:

• FHA 203(k): More flexible, suitable for buyers with lower scores.
• CHOICERenovation®: Conventional standards; higher scores may get better rates.

Renovation Types:

• FHA 203(k): Structural and non-structural repairs.
• CHOICERenovation®: Broad improvements, including disaster mitigation.

Loan Limits:

• FHA 203(k): Follows FHA county loan limits.
• CHOICERenovation®: Follows conventional loan limits.

Choosing between these two options depends on your credit, your property type, and the nature of your renovation project.

• If you’re buying a primary residence and need flexible credit guidelines, the FHA 203(k) is a classic choice.
• If you have a higher credit score or are working with an investment or vacation property, CHOICERenovation® may be the better fit.

No matter which renovation loan you choose, the right lender can make all the difference. At US Lending Company, our team will guide you every step of the way—from choosing the right program to finalizing your remodel.

Click here to connect with a US Lending Company Loan Advisor.

Looking for more tips? Check out our latest blog posts or see our Remodeling page for more information on renovation financing.

US Lending Company—helping you create the home you’ve always wanted, one renovation at a time.