You found a house in a neighborhood you love. The layout works. The lot works. The price works.

The kitchen is from 1987, the roof has maybe three years left, and the whole thing needs flooring.

Most buyers walk away from that house. That is often a mistake.

A renovation loan lets you finance the purchase and the improvements in a single mortgage, based on what the home will be worth after the work is done — not what it is worth today. In a market like Northeast Florida, where move-in-ready inventory carries a premium, this is one of the more underused tools available to a buyer.

The catch is that there are five different renovation programs, and they are not interchangeable. Here is how to tell which one fits your situation.

Smaller, nonstructural work: FHA 203(k) Limited

This is the program for updating or repairing a home without moving walls.

• Up to $75,000 in total renovation costs
• No minimum renovation amount
• Owner-occupied properties
• No HUD Consultant required

Think kitchens, bathrooms, flooring, roofing, HVAC, and other eligible nonstructural improvements. Because there is no consultant requirement, this is generally the simplest renovation loan to close.

Bigger or structural work: FHA 203(k) Standard

When the project goes beyond cosmetic, this is usually the better fit.

• $5,000 minimum renovation amount
• Structural repairs and additions are allowed
• Conversions and certain ADU projects may be eligible
• A HUD 203(k) Consultant is required

Think additions, structural changes, major rehabilitation, or any project involved enough to need real oversight. The consultant requirement adds a step, but it also adds protection — someone independent is verifying the scope and the draws.

Conventional financing with more flexibility: Freddie Mac CHOICERenovation

This is where the possibilities open up, and it is the program most people have never heard of.

• Primary residences
• Eligible second homes and one-unit investment properties
• Structural repairs and additions
• Attached or detached ADUs
• Eligible luxury improvements

In certain situations, income from an ADU may even be used to help you qualify. That is worth pausing on: you can finance building the unit, and the projected rent from that unit may support the loan.

This is the one to remember when a scenario does not fit neatly inside FHA guidelines.

Eligible veterans: VA Renovation

If you are a VA-eligible borrower and you have found a home that needs work, do not eliminate the property automatically.

• Up to 100% LTV
• Up to $100,000 in renovation costs
• Owner-occupied properties
• Eligible repairs and improvements

A VA borrower may be able to purchase the home and finance the improvements, potentially with no down payment. In Jacksonville, with the military population we have here, this program is badly underused.

Eligible rural properties: USDA Renovation

If the property sits in a USDA-eligible area, a home that needs repairs may still be an opportunity rather than a dead end.

• Owner-occupied
• One-unit properties
• Structural repairs and additions may be eligible
• Up to 101% of the after-improved value, subject to current program guidelines

Large portions of Clay County, Nassau County, and western Duval County fall inside USDA-eligible boundaries. People are often surprised how close to Jacksonville those areas begin.

Conventional financing for larger projects: Fannie Mae HomeStyle Renovation

HomeStyle is Fannie Mae’s renovation program, and it is the closest conventional equivalent to a 203(k) Standard. It finances the purchase or refinance plus the improvements in one conventional loan, underwritten to the as-completed value.

What sets HomeStyle apart is scope. It allows structural work, room additions, and improvements FHA will not finance, including pools, outdoor kitchens, detached garages, and accessory dwelling units. It is available on primary residences, second homes, and investment properties for qualified borrowers.

Renovation funds are generally capped at a percentage of the as-completed value, and the work must be performed by a licensed contractor under a signed bid. Program guidelines apply.

HomeStyle also carries the usual conventional advantage. Once you reach sufficient equity, mortgage insurance can typically be removed. On an FHA 203(k), the mortgage insurance premium generally stays for the life of the loan.

If you are weighing HomeStyle against CHOICERenovation, the two are close cousins. The differences show up in underwriting detail rather than in the headline, and it is worth running your specific file through both.

Building an accessory dwelling unit is one of the more common reasons Jacksonville homeowners land on a conventional renovation loan. We covered that in more detail in ADU financing in Jacksonville.

A quick way to narrow it down

• Cosmetic work under $75,000, owner-occupied — start with FHA 203(k) Limited
• Structural work, additions, or major rehab — FHA 203(k) Standard
• Investment property, second home, ADU, or luxury improvements — CHOICERenovation
• Structural work, additions, or luxury items financed conventionally — HomeStyle Renovation
• VA-eligible and want no money down — VA Renovation
• Property in a USDA-eligible area — USDA Renovation

What renovation loans can and cannot pay for

Every program has its own list, but the general boundaries are consistent across all of them.

Generally eligible improvements

• Roof, HVAC, plumbing, and electrical replacement or repair
• Kitchen and bathroom remodels
• Flooring, paint, windows, doors, and siding
• Structural repairs, room additions, and foundation work (Standard 203(k), HomeStyle, and CHOICERenovation)
• Accessibility modifications
• Energy-efficiency improvements
• Well, septic, grading, and drainage work
• Permanently affixed appliances
• Accessory dwelling units (conventional programs)

Generally not eligible

• Work already completed before closing
• Luxury items on FHA programs, including pools and outdoor kitchens
• Furniture, decor, and anything not permanently attached to the property
• Work that cannot be documented with a licensed contractor bid

The rule that catches people most often is the first one. Improvements you pay for and complete before closing generally cannot be reimbursed out of renovation funds. If you are considering a renovation loan, talk to a lender before you start any work.

How the process actually works

A renovation loan is a standard mortgage with a construction file attached to it. The extra steps are what trip people up, so here is the order they happen in.

1. Get pre-approved first. Your pre-approval sets the combined budget for purchase price plus improvements.
2. Find the property. Write the contract with enough time for the renovation steps. Thirty days is usually tight.
3. Get a contractor bid. The bid needs to be itemized, signed, and complete. Vague bids delay files more than anything else in this process.
4. Bring in a consultant if required. A HUD 203(k) Consultant is required on a Standard 203(k) and prepares the work write-up. A Limited 203(k) does not require one.
5. Order the as-completed appraisal. The appraiser values the home as if the work in the bid is already finished.
6. Underwriting. The loan file and the renovation file are reviewed together. All loans are subject to credit approval.
7. Close. You close on the purchase. The renovation funds are placed in an escrow account rather than disbursed to you.
8. Draws and final inspection. The contractor is paid in stages as work is inspected and completed. A final inspection releases the last draw.

What your contractor will need to provide

• Active state license and proof of general liability insurance
• Completed W-9
• Itemized, signed bid covering the full scope of work
• Contractor profile or resume showing relevant experience
• Signed homeowner-contractor agreement

Not every contractor is willing to work inside a renovation loan draw schedule. It is worth confirming that before you sign a contract.

Contingency reserves, draws, and mortgage insurance

Renovation programs require a contingency reserve, typically in the range of ten to twenty percent of the bid depending on the program and the condition of the property. This covers the surprises behind the walls. If you do not use it, unused contingency generally goes toward reducing your principal balance or funding additional approved work.

Work usually must be completed within a set window after closing, commonly six to twelve months depending on the program. Draws are released after inspection, not in advance.

On FHA programs, the amount you can borrow is tied to a calculation based on as-completed value. We walked through that math in how the FHA 203(k) 110% calculation works.

Common mistakes to avoid

• Starting work before closing. Improvements completed early generally cannot be financed.
• Writing a 30-day contract. Renovation files need room. Build the timeline into your offer.
• Using a contractor who has never done a draw-based project. This is the most common cause of delay.
• Underestimating the bid. Change orders mid-project require re-approval and slow everything down.
• Choosing the program before scoping the work. The scope determines the program, not the other way around.
• Assuming the appraisal will support any budget. The as-completed value has to justify the improvements.

A Northeast Florida example

A buyer finds a 1970s ranch in Mandarin listed at $340,000. It needs a roof, HVAC, kitchen, and flooring. The contractor bids the work at $85,000.

Because the scope includes no structural changes and the buyer intends to occupy the home, the file is a candidate for FHA 203(k). The appraiser values the home at $455,000 as completed. The purchase price plus the renovation budget and contingency fall within program limits, so the buyer finances the house and the work in one loan and closes with a single monthly payment.

The buyer ends up in the neighborhood they wanted, in a home updated to their own specification, at a total cost below what a comparable renovated home in the same area was listed for. Figures are illustrative estimates based on the information provided and are not a commitment to lend. Actual terms depend on the property, the scope of work, the appraisal, and credit approval.

One more comparison worth making before you commit. If the project is modest and you already have substantial equity, a home equity loan or HELOC may be simpler and faster than a renovation loan — no draws, no contractor administration, no after-improved appraisal. The tradeoff is that a second lien underwrites to what your home is worth today, while a renovation loan underwrites to what it will be worth after the work. On larger projects that difference can unlock considerably more money, which is exactly why the two are worth comparing side by side rather than assuming.

Frequently asked questions

What is a renovation loan?

A renovation loan is a single mortgage that finances both the purchase of a home and the cost of improving it. The loan amount is based on the home’s value after the renovations are completed rather than its current condition.

How much can I borrow for renovations?

It depends on the program. FHA 203(k) Limited allows up to $75,000 in total renovation costs. VA Renovation allows up to $100,000. FHA 203(k) Standard and CHOICERenovation are governed by program limits and the after-improved appraised value rather than a flat renovation cap.

Do I need a down payment for a renovation loan?

FHA renovation loans follow standard FHA down payment guidelines. VA Renovation allows up to 100% LTV for eligible veterans. USDA Renovation allows up to 101% of the after-improved value, subject to current program guidelines. Conventional CHOICERenovation follows conventional down payment requirements.

Can I use a renovation loan on an investment property?

Yes, on Freddie Mac CHOICERenovation, which permits eligible one-unit investment properties and second homes. The FHA, VA, and USDA renovation programs are limited to owner-occupied properties.

Can I build an ADU with a renovation loan?

Attached and detached ADUs are eligible under CHOICERenovation, and certain ADU projects may be eligible under FHA 203(k) Standard. In some situations, ADU rental income may be used to help qualify.

What is a HUD 203(k) Consultant and do I need one?

A HUD 203(k) Consultant is an independent professional who reviews the scope of work and oversees the draw schedule. One is required on FHA 203(k) Standard loans and is not required on FHA 203(k) Limited.

Can I do the renovation work myself?

Renovation programs generally require licensed contractors and documented bids. Self-performed work is restricted and varies by program, so this should be discussed before you write an offer.

Is a renovation loan worth it in Jacksonville?

Frequently, yes. Move-in-ready homes in Northeast Florida carry a premium, and homes needing work often sit longer and sell for less. A renovation loan lets you compete for a property other buyers are skipping.

Not sure which one fits?

You do not need to know. That part is my job.

Send me four things and I will tell you which programs are realistic:

• Purchase price
• Property type
• Estimated renovation amount
• What you want to do to the home

Do not walk away from a property because it needs work. A house that does not fit one program may fit another. You just need to recognize the opportunity — and that is something worth a ten-minute conversation before you decide to pass.

• Check today’s rates
• Run the numbers with our mortgage calculators
• Start with the Purchase Assistant if this will be your first home
• Buying a rental that needs work? See our DSCR loan programs for investors

We serve buyers throughout Jacksonville, St. Johns County, Clay County, and Nassau County.

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Nathan Young | Founder & President, North Star Mortgage Network, Inc.
Since April 18, 2000, Nathan Young has been a Florida mortgage expert and the founder of North Star Mortgage Network, Inc. He is a 2025 NAMB Mortgage Broker of the Year recipient and a licensed (non-practicing) Florida real estate sales associate (License #SL639409).

North Star Mortgage Network, Inc.
12058 San Jose Blvd, Suite 404, Jacksonville, FL 32223
Call or text: 904-880-6741 | nathan@nsmn.com | www.nsmn.com

Company NMLS #356789 | Nathan Young NMLS #325206 | FL DBPR MB0858506

All figures shown are estimates based on information provided and are not a commitment to lend. North Star Mortgage Network, Inc. is a licensed mortgage broker and arranges loans through third-party lenders; it does not make loans directly. Renovation program limits, eligibility requirements, and loan-to-value maximums are set by FHA, VA, USDA, and Freddie Mac and are subject to change. All loans are subject to credit approval and property qualification. Restrictions apply.

CHOICERenovation: the details that decide most scenarios

Because Freddie Mac CHOICERenovation covers the widest range of situations, it is worth understanding how the numbers are actually set. These are the guidelines that most often determine whether a project fits.

Maximum loan-to-value by property type

• One-unit primary residence: 95% standard, up to 97% under HomeOne
• Two-unit primary residence: 95%
• Three- to four-unit primary residence: 80%
• Second home, one unit: 90%
• Investment property, one unit: 85%

On a purchase, loan-to-value is calculated against the lesser of the as-completed appraised value or the purchase price plus renovation costs. On a refinance, it is based on the as-completed value alone. Total renovation costs cannot exceed 75% of the as-completed value, and the work must be finished within 12 months of closing.

Eligibility details that catch people off guard

• The borrower must be an individual. Loans in the name of an LLC or trust are not eligible.
• You cannot be related to or employed by your contractor.
• Your contractor cannot be affiliated with the broker originating the loan.
• The file must receive an Accept from Freddie Mac’s automated underwriting. Manual underwrites are not permitted on this program.
• Condominium renovations must be interior only and approved by the HOA.
• A HUD-approved Renovation Consultant is required when the project includes structural work, or when the contractor has no prior renovation loan experience.

Appraisals, draws, and payment escrows

The appraisal must reflect the as-completed value, and transferred appraisals are not accepted on this program. You are allowed up to five draw requests including the final disbursement, and a contingency reserve of at least 10% is required on every project.

If the home will not be habitable during construction, you may be able to escrow up to six months of mortgage payments on a primary residence, which can make a larger project workable for a borrower who is also paying rent somewhere else. That option is generally not available in HOA-governed properties.

Guidelines summarized here reflect current Freddie Mac requirements and are subject to change. Every scenario is reviewed individually, and all loans are subject to credit approval and property qualification.