Rehab Loans

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Rehab Loans: Finance Your Fixer-Upper or Investment Property

Rehab loans are designed to help homebuyers and real estate investors purchase and renovate homes with a single loan. Whether you’re buying a fixer-upper to make it your dream home or flipping a property for profit, a rehab loan provides funds for both the purchase price and renovation costs in one convenient package.

Key Benefits of Rehab Loans:

✔️ Finance Both Purchase & Renovation Costs – No need for separate loans; rehab loans combine them into one mortgage.

✔️ Great for Fixer-Uppers – Enables homebuyers to buy properties that need repairs and transform them affordably.

✔️ Low Down Payment Options – Some rehab loan programs require as little as 3.5% down (FHA 203k).

✔️ Increase Home Value – Renovate, modernize, and boost property value right after purchase.

✔️ Flexible for Investors & Homeowners – Different loan options exist for owner-occupied homes and investment properties.

Types of Rehab Loans:

1. FHA 203(k) Loan – Best for Primary Homeowners

The FHA 203(k) loan is a government-backed option for buyers looking to purchase a home and finance its renovation.

✅ Minimum Credit Score: Typically 580-620

✅ Down Payment: As low as 3.5%

✅ Eligible Renovations: Structural repairs, kitchen/bath remodels, flooring, plumbing, roofing, HVAC, and more.

✅ Loan Limits: Based on FHA loan limits for the area.

There are two types of FHA 203(k) loans:

• Limited 203(k): For cosmetic or non-structural repairs up to $35,000.

• Standard 203(k): Covers major structural repairs with no cap on renovations (up to FHA loan limits).

2. Fannie Mae HomeStyle® Renovation Loan – Conventional Rehab Loan

The HomeStyle® Renovation Loan allows borrowers to purchase and renovate a home with a single conventional mortgage.

✅ Minimum Credit Score: 620+

✅ Down Payment: As low as 3% for first-time buyers

✅ Eligible Properties: Primary homes, second homes, and investment properties

✅ Eligible Renovations: Upgrades, structural repairs, additions, energy efficiency improvements, and even luxury features like pools.

💡 Bonus: Unlike FHA 203(k), HomeStyle® loans don’t require FHA mortgage insurance.

3. Hard Money Rehab Loans – Best for Investors & Flippers

Hard money rehab loans are short-term, asset-based loans that provide quick financing for investors looking to buy, renovate, and flip properties.

✅ Fast Approval & Funding – Close in as little as 7-10 days.

✅ Credit Score Not a Major Factor – Approval based on property value, not credit score.

✅ Loan Amounts Based on ARV (After Repair Value) – Lenders typically lend up to 70-75% of ARV.

✅ Interest-Only Payments – Lower payments during renovation phase, full repayment due upon property sale or refinance.

💡 Great for: House flippers, BRRRR investors, and those needing fast rehab financing.

4. DSCR Rehab Loans – Best for Long-Term Rental Investors

Debt-Service Coverage Ratio (DSCR) loans allow investors to finance rehab properties based on rental income potential, rather than personal income or employment history.

✅ No Income Verification – Qualification is based on the rental income covering the mortgage.

✅ Great for Long-Term Rentals & BRRRR Strategy – Purchase, renovate, rent, and refinance with ease.

✅ Flexible Loan Terms – Available as interest-only or 30-year fixed loans.

💡 Best for: Real estate investors who want to rehab a rental property without personal income documentation.

Who Can Benefit from a Rehab Loan?

🏡 First-Time Homebuyers – Buy a home in need of repairs at a lower price and customize it.

🏡 House Flippers – Investors who want to buy, fix, and sell for profit.

🏡 BRRRR Investors – Rehab, rent out, and refinance properties for passive income.

🏡 Landlords – Renovate distressed properties and turn them into high-yield rental units.

How to Qualify for a Rehab Loan

1️⃣ Check Your Credit Score – 580+ for FHA 203(k), 620+ for HomeStyle®, No Minimum for Hard Money.

2️⃣ Get Pre-Approved – Work with a mortgage professional to determine your loan amount.

3️⃣ Find a Property & Create a Renovation Plan – The property must meet loan requirements, and renovations need lender approval.

4️⃣ Hire a Licensed Contractor – Most rehab loan programs require a professional contractor to complete the work.

5️⃣ Complete the Renovation & Move In/Sell – Funds are disbursed in stages (draws) as work is completed.

Rehab Loans vs. Traditional Home Loans

Are You Ready to Start Your Rehab Project?

If you’re looking to finance a fixer-upper, flip a property, or renovate your dream home, a rehab loan can provide the funding you need. Contact us today to discuss your options and get pre-approved for your rehab loan!