1st Florida Mortgage

Choosing the Right Mortgage for a Fixer Upper

The biggest difference you’ll be facing is that you’re applying for a mortgage based on the value of the house after the renovation, and not what the home is worth at the time of purchase. Unlike traditional fixed rate mortgage options, fixer-upper homes will need a unique loan.

There are two main types of loans available for these kinds of home purchases, and they are the Federal Housing Administration (FHA) 203(k) rehabilitation loan or the Fannie Mae HomeStyle renovation mortgage. These loans have different terms, conditions and borrowing limits, and you should explore each option to decide which loan is best suited to your financial situation and your renovation goals.

FHA 203(k) Loan

FHA allows homebuyers to borrow more than the home is worth. This loan is usually applicable for any home in need of repair or renovation. Borrowers can apply for up to 110% of the expected appraised value of the home after the renovations are completed. If you have little cash for a down payment or a lower credit score, this is a fantastic option.

Your credit score must be at least 620 or 640, depending on the lender. You’ll also need: a minimum down payment of 3.5%, mortgage insurance, and you’ll work with a 203(k) consultant to determine if your renovation goals are feasible if you choose this loan option. You might even be able to negotiate some DIY work into the budget for your FHA 203(k).

Fannie Mae HomeStyle Loan

The Fannie Mae mortgage offered for fixer-uppers requires This renovation mortgage offered by Fannie Mae requires a 5% down payment and a minimum credit score of 620. This loan allows you to borrow up the purchase price of the home plus the cost of renovations, or up to 95% of the appraised value of the home after renovations. With this loan, you will need to use only lender-approved contractors who will need to finish all the renovations within 12 months. HomeStyle loans don’t allow for any do-it-yourself repairs. However, they allow borrowers to make the same renovations as with a FHA 203(k) loan, and also allow for the addition of luxury items.

Choose a Contractor

You must always keep in mind your lender must approve your contractor choices. Take your time finding the right contractor for your project—and check that they’re licensed, insured, and in good standing. Ask to view jobs they’ve already completed to make sure you like their work and call their references.


Your initial mortgage payments have the option to be suspended while your home is under renovation. But be aware that the interest will still be building up.

Closing time could take longer. Fees like appraisal and origination could be higher than traditional loans, so keep that in mind. Also, you could face a higher interest rate than other conventional mortgages. Another consideration for you is that the maximum amount you can borrow must fall within comparable mortgage limits in your area.


Overall, if your heart is set on a fixer-upper and you don’t have the cash to finance the renovations yourself, choosing mortgage options like the FHA 203(k) rehabilitation loan or the Fannie Mae HomeStyle Renovation Mortgage are great solutions to make your dream home come true. By taking a less-than-perfect house and adding some much-needed renovations, you’ll not only improve the value of your future home, but also improve the entire value of the neighborhood. Home renovations and rehabilitation projects are great for the entire community and help keep neighborhoods alive.

First Florida Mortgage Can Help

At First Florida Mortgage, we are a Florida-based mortgage company. We want to help you through every step of financing your new home. Fill out the quick contact form or call First Florida Mortgage today at 1-800-501-2131 to speak with one of our Florida mortgage specialists and get a free good faith estimate.

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