Best Fixer Upper Loans in 2024

The RefiGuide published this guide for consumers to find the best fixer upper loan programs and get matched with banks, brokers and lenders that meet their needs. Buying a fixer-upper home can be an excellent investment, offering the opportunity to purchase a home at a lower cost and customize it to your preferences. However, getting approved for mortgage loans for fixer uppers for can be challenging whether you are buying and renovating of a fixer-upper house.

Guide to Fixer Upper Loans to Finance Home Repairs, Improvements and More

There are several popular fixer upper home loan options are available specifically designed to help buyers transform distressed properties into dream homes.

Here are the best fixer-upper loans in 2024 to consider to finance a home remodeling, rehabilitation or your home renovation project.

Fortunately, you can buy a fixer upper with a FHA loan and six other fixer upper loans we will explore in this article.

1. FHA 203k Renovation Loan

The FHA 203k loan is one of the most popular options for financing a fixer-upper. The FHA 203K loan is still insured by the Federal Housing Administration allows you to combine the purchase price and renovation costs into a single mortgage. There are two types of FHA 203(k) loans: Standard and Limited.

Standard FHA 203(k) Loan – Ideal for major renovations, structural repairs, or remodeling projects that cost more than $35,000. This loan requires a minimum renovation cost of $5,000.
Limited FHA 203(k) Loan–  Suitable for minor repairs and non-structural home improvements with a maximum renovation cost of $35,000.

Pros:

• Low down payment requirements (as low as 3.5%).
• Available to borrowers with low credit scores. (580)
• Allows for extensive home renovations.

Cons:

• Mortgage insurance is required. (mortgage insurance premium is charged monthly)
• Extensive paperwork and approval process.
• Limited to owner-occupied primary residences only.

2. Home Equity Loans and Credit Lines

If you already own a home and have built up significant equity, you might consider using home equity loans and credit lines to finance your fixer-upper project. There are many 2nd mortgages for home improvements worth considering with fixed rate or revolving interest only payment options with a HELOC.

Pros:

• Lower home equity interest rates compared to personal loans. (shop for the best home equity loan rates online)
• Tax-deductible interest for home improvement projects (consult with a trusted tax advisor).
• Flexible use of funds with a revolving home equity line of credit

Cons:

• Requires existing home equity.
• Your home is used as collateral.
• Risk of foreclosure if you fail to make payments.

3. Freddie Mac CHOICE Renovation Loan

The Freddie Mac choicerenovation loan was created to help home buyers finance the purchase and renovation of a house with a single mortgage. These fixer upper home loans are similar to the Fannie Mae HomeStyle Renovation loan and can be used for a variety of renovation projects. Home renovations must be completed within a year of closing on the loan. Additionally, Freddie Mac requires a minimum credit score of 660 for this renovation loan program.

Pros:

• Can be used for primary residences, second homes, and investment properties.
• Allows for a wide range of renovations, including disaster-proofing improvements.
• Flexibility to finance up to 100% of the renovation costs.

Cons:

• Requires a higher credit score
• May require private mortgage insurance (PMI) if the down payment is less than 20%
• More difficult to qualify for

4. VA Renovation Loan

You can still buy a fixer upper with a VA loan in 2024. The VA Renovation Loan is available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves. This VA loan combines the purchase price and renovation costs into a single mortgage, similar to the FHA 203k loan.

Pros:

• No down payment required for eligible borrowers
• Competitive interest rates on VA renovation loans
• No private mortgage insurance (PMI)

Cons:

• Limited to eligible veterans and service members
• Renovation costs must not exceed the appraised value of the home after repairs
• May have stricter property condition requirements

5. USDA Single Family Housing Repair Loans and Grants

The USDA Housing Repair Loans and Grants, also known as the Section 504 Home Repair Program, provides fixer upper home loans and grants to low-income homeowners in rural areas for home repairs and improvements. Take advantage of USDA home loans that have been helping American borrowers in Rural areas for decades.

Pros:

• USDA renovation loan may be available at a 1% interest rate. (See USDA for 1% stipulations)
• Home Buyer Grants available for homeowners aged 62 and older
• Can be used for essential repairs and improvements

Cons: 

• Limited to low-income homeowners in eligible rural areas
• Grants have a maximum limit of $10,000
• USDA renovation loans have a maximum limit of $40,000

6. Fannie Mae HomeStyle Renovation Loan

The Fannie Mae HomeStyle Renovation loan is another excellent option for financing a fixer-upper. This conventional loan allows you to borrow funds based on the future appraised value of the property after renovations. The Fannie Mae homestyle loans can be used for a wide range of renovation projects, including luxury upgrades and energy-efficient improvements.

Pros:

• Can be used for primary residences, second homes, and investment properties.
• Allows for luxury renovations and additions.
• No minimum renovation cost requirement.

Cons:

• Requires a higher credit score compared to FHA 203(k) loans.
• More significant down payment required (usually 5% or more).
• Stricter underwriting guidelines.

7. Personal Loans

The personal loan has soared in popularity in 2024. This unsecured loan does not require you to borrow against real estate and can also be an option for financing a fixer-upper, especially if you have strong credit and need funds quickly. While not specifically designed for home renovations, personal loans can provide the necessary capital for smaller projects. Ask about the 0% home improvement loans and verify your potential eligibility.

Pros:

• Quick approval and funding process.
• No collateral required.
• Can be used for a variety of purposes, including home improvements.

Cons:

• Higher interest rates compared to mortgage loans.
• Shorter repayment terms.
• Smaller loan amounts may not cover extensive renovations.

Choosing the Right Fixer-Upper Loan

Selecting the best loan for your fixer-upper project depends on various factors, including your financial situation, credit score, renovation plans, and eligibility requirements.

Here are some tips to help you choose the right loan:

Before buying a fixer upper, consider your current financial status, including your credit score, monthly income, savings, and debt to income ratios.

This will help determine which fixer upper loan options you qualify for and which ones offer the best terms for your needs.

Evaluate your renovation plans and determine the scope and cost of your renovation project. Some loans have limits on renovation costs, so it’s essential to choose a loan that can cover your planned improvements.

Consider eligibility requirements and review the guidelines for each fixer upper loan option. Some loans are limited to specific borrower types, such as veterans or low-income homeowners, while others have stricter credit and income requirements.

Always compare interest rates, terms and closing costs. Look at the interest rates, repayment terms, and fees associated with each fixer upper loan option. Choose a loan with favorable terms that fit your budget and long-term financial goals.

Consult with an experienced loan officer. Speak with a mortgage broker or loan officer to get personalized advice and explore all available options. They can help you navigate the application process and find the best loan for your renovation project.

Highlights of Fixer Upper Loans Online

Financing a fixer-upper can be a smart investment, allowing you to purchase a property at a lower cost and customize it to your preferences. With various loan options available in 2024, you can find the right financing solution to turn your renovation dreams into reality.

Buying a fixer-upper can be a wise and pragmatic decision when you find a diamond in the rough and transform an average house into an extraordinary home. Fixer upper home loans simplify this process by enabling you to purchase and renovate the property with a single loan.

Whether you choose a home equity loan, FHA 203k loan, a Fannie Mae Renovation loan, a VA Rehab loan, cash out refinance, HELOC or an unsecured loan option, it’s essential to do your research, compare lenders, financing terms, closing costs and choose the loan that best meets your needs and goals. With the right financing in place, you can transform a distressed property into your dream home.

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