It has its heart and mind set on a mid- to turn-of-the-century split level with a large lot not far from the interstate and downtown. But his friends and family feel a new home is much better, warning him about termites, faulty wiring and leaky pipes. You could go with a new house, but the 30-40 minute drive overwhelms you. Don’t give up on your plans; You can make an old house feel new again! With a home renovation loan, you can buy and fix up your new home with a single loan. Now you can have it all: a nice house, a wonderful neighborhood, and a short drive to downtown.

First, you need to know your loan options.

There are 4 types of loans for home renovations:

Optimize FHA 203K
This loan is for limited repair primary residences under $35,000. The 203K requires a down payment of as little as 3.5% of its purchase cost. So if you take out a $200,000 loan, your down payment after the contract price and repairs is $7,000. The Streamline 203K is great for people with a credit score below 640. There is no consultant to manage repairs; this loan is to “optimize” and can be occupied immediately after closing. You can have up to three contractors who must be licensed for any specialty work. The contractor will receive a withdrawal in the amount of 50% of the total contract and then the balance of final payment upon completion of the work.

FHA 203K Consultant
This loan is typically used for homes with repairs over $35,000 or that require structural repairs to the foundation, well, or pool. There should only be one general contractor (GC), but there can be up to three contractors. The main difference between this loan and the Streamline is that you need to hire a HUD-approved consultant to work with the GC to protect the buyer’s and lender’s interest and do a lottery schedule so that the renovation funds are disbursed correctly. Contractors do not receive any money up front and their fee is based on work completed. The HUD consultant will know what money to take out of the contractors based on the amount of work completed.

Home Style Renovation Loan
This is a conventional Fannie Mae loan that requires as little as a 5% down payment for primary residences, a 10% down payment for a second home, and a 20% down payment for an investment property. If you put a 20% down payment, you do not need to have mortgage insurance. This loan works like the 203K and has the category of agile and consultant.

Homepath Renovation Loan
This loan is for foreclosures owned by Fannie Mae and can be for a primary residence, a second home, or an investment property. You can make a 3% down payment for primary residences without a mortgage, but for investment properties you’ll need a 15% down payment.

Most people don’t even know these loans exist, but now you do! The best part about these home renovation loans is that you are working with a team and you don’t have to renovate a house with your own money.