If you’re searching for a home that needs upgrades or repairs, a conventional renovation loan could be the solution. This loan type allows buyers to purchase a property and finance renovations under a single mortgage. Unlike standard loans, where you might need a separate loan for repairs, everything is bundled together, making budgeting and repayment much simpler.
Quick Answer: A conventional renovation loan is a mortgage that lets you buy a home and finance its renovations in one loan, with a single monthly payment.
At CFS Companies Inc., we specialize in guiding clients through renovation financing options. Whether you’re a homeowner or investor, we provide tailored strategies to help secure the right loan for your project.
How Does a Conventional Renovation Loan Work?
Here’s a breakdown of the process:
- Loan Application – Similar to applying for a traditional mortgage.
- Combined Amount – You borrow funds for both the home purchase and the estimated renovation costs.
- Future Value Assessment – The loan is based on the after-renovation value of the property, not just its current value.
- Fund Disbursement – Renovation funds are released in stages as work progresses.
Example Chart: Loan Comparison
| Loan Type | Covers Property Only | Covers Property + Renovation | Single Monthly Payment | Based on Future Value |
|---|---|---|---|---|
| Standard Mortgage | ✅ | ❌ | ✅ | ❌ |
| Renovation Loan | ❌ | ✅ | ✅ | ✅ |
At CFS Companies Inc., we help estimate renovation costs and connect you with trusted contractors—ensuring that your investment enhances both comfort and resale value.
Types of Conventional Renovation Loans
Two major options are available:
- Fannie Mae HomeStyle® Renovation Loan
- Can be used for single-family or multifamily properties.
- Covers both structural and cosmetic upgrades.
- Flexible for investors and homeowners alike.
- Freddie Mac CHOICERenovation® Loan
- Funds both the property purchase and improvements.
- Ideal for upgrades ranging from energy efficiency to disaster repairs.
👉 Both loan types provide competitive interest rates and financing flexibility, making them excellent for boosting property value.
Learn more about related strategies in our guide on real estate investment property renovations.
Benefits of a Conventional Renovation Loan
A conventional renovation loan offers multiple advantages:
- One Loan, One Payment – Simplifies budgeting by combining purchase and renovation into one.
- Competitive Interest Rates – Typically lower than credit cards or personal loans.
- Covers Multiple Property Types – Primary residences, second homes, and rental properties.
- Boosts Property Value – Renovations financed upfront often deliver higher resale returns.
💡 Fact: Renovating before moving in often costs less than waiting years later, since improvements immediately add value and equity to your property.
Eligibility Requirements
To qualify, most lenders require:
- Credit Score: Minimum 620 (higher scores may get better rates).
- Down Payment: Usually starts at 5%.
- Debt-to-Income Ratio (DTI): Monthly debts should not exceed 40% of gross income.
At CFS Companies Inc., we guide clients through pre-qualification, helping identify the best financing options based on their profile.
How to Apply for a Conventional Renovation Loan
Here’s the step-by-step application process:
- Get Pre-Approved – Understand your borrowing limits.
- Submit Renovation Plans – Include cost breakdowns for lender approval.
- Loan Approval – Based on future property value after upgrades.
- Renovations Begin – Contractors complete work in stages.
- Funds Released – Lender disburses payments as work progresses.
- Start Repayment – Make monthly payments on the total loan.
Flowchart Example: Loan Process
[Application] → [Pre-Approval] → [Submit Plans] → [Approval] → [Renovations] → [Funding] → [Repayment]
CFS Companies Inc. partners with top lenders to ensure a smooth application experience from start to finish.
Is a Conventional Renovation Loan Right for You?
This loan is ideal for:
- First-time buyers purchasing a fixer-upper.
- Investors upgrading rental properties.
- Homeowners planning major renovations without multiple loans.
⚠️ Consider Alternatives: If the property requires major structural repairs, an FHA 203K Loan might be more suitable.
For a deeper dive, explore our insights on what is a renovation loan.
About CFS Companies Inc.
At CFS Companies Inc., we help homeowners, buyers, and investors secure financing that aligns with their goals. With expertise in construction, renovation loans, and real estate financial planning, we provide strategies that simplify the borrowing process and maximize returns.
Explore our Consumer Financial Services to see how we can support your next project.
Conclusion
A conventional renovation loan provides an efficient way to combine home purchase and renovation costs under a single mortgage. With flexible terms, competitive rates, and the potential to increase property value, it’s a smart financial tool for both buyers and investors.
At CFS Companies Inc., we’re committed to guiding you every step of the way—from loan application to completed renovations. Contact us today to learn how we can help turn your property goals into reality.