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There are quite a few loan options available to buy fixer-upper homes. The main fixer-upper loan choices covered here are FHA, VA and conventional mortgages.
“By buying a fixer-upper, you can definitely increase the value of the home as it appreciates and as you fix it up,” says Sarah McCalmon. She is a loan officer for the Sierra Pacific Mortgage, Inc., in San Diego. “You also have the pride of doing something good for the neighborhood and your community.”
There are several different types of loans to choose to fix up real estate that needs remodeling: inside, outside or both.
Check your home buying eligibility. Start here (Nov 8th, 2026)
FHA fixer-upper loan options
The Federal Housing Administration (FHA) is part of the Department of Housing and Urban Development (HUD). It offers a few different options, including the FHA 203K Rehab Loan. FHA partners with state and local housing agencies and non-profit organizations to rehabilitate properties.
According to the FHA website, these 203(k) loans can be combined with other HUD programs to help with the rehab. With the FHA 203(k) loan, the borrower can get just one long-term loan, at a fixed or adjustable rate. That single loan finances both the purchase price of the home and the renovation costs.
To provide the funds for the home improvements, the mortgage amount is based on the property’s projected value with the work done. The calculation also takes into account the cost of the work. The buyer can also put down as little as 3.5 percent. The standard 203(k) is not the only option. FHA also offers a Limited 203(k), which caps the amount you can finance for repairs at $75,000.
“To get such a loan, though, you have to get a bid from the contractor … That underwriter will then review the credentials and client references of the contractor,” McCalmon says. “The borrower can do the repairs themselves, too, but the money for the rehab has to be based on a bid.”
You have to find a lender that can guide you through the process. The mortgage lender also has to be an approved FHA lender. For a standard 203(k), the lender must also use an FHA-approved 203(k) consultant.
How do I qualify for a 203k FHA Rehab loan?
Some of the rules might mess people up with these loans. The work must start within 30 days after the loan funds. It must also be finished within the time set in the loan agreement. That limit is up to 12 months for a standard 203(k) and up to nine months for a Limited 203(k).
“If you don’t get it done in that time, you may not get all the funds,” McCalmon says.
Suppose the homebuyer cannot live in the new home while it is being finished. In that case, a standard 203(k) can include up to 12 months of mortgage payments in the loan. Those reserves cover only the months the home can’t be occupied. This lets the homebuyer live somewhere else without being too strapped for cash.
And McCalmon knows about rehabbing. She and her husband bought a fixer-upper, and her husband is a contractor. She has advice for homebuyers planning DIY renovations.
“We live in the construction zone, and now it’s 14 months later, and we are still working on it,” she says. “Don’t underestimate the time and money you will spend. Always add 10 percent on top of your budget for unforeseen problems.”
What homes are eligible for 203k FHA Rehab loans?
A 203(k) can finance a home in worse shape than a regular FHA loan allows. A home that fails FHA’s health and safety standards may still qualify if the planned work will correct those problems. The home must have been completed at least one year before your lender requests the FHA case number.
A standard 203(k) can even pay to rebuild a house that has been or will be torn down. The existing foundation must stay in use, though. A Limited 203(k) is narrower. It covers only minor, nonstructural repairs, and the work can’t keep you out of the home for more than 30 days in total.
FHA also offers add-on options, including the Energy Efficient Mortgage. It can increase the maximum amount of the loan so you can add energy-efficient items such as windows and appliances.
You can also look at HUD’s Good Neighbor Next Door program. It is a separate HUD sale program, not an FHA 203(k) add-on. It sells HUD-owned homes in designated revitalization areas at a 50% discount. The discount goes to law enforcement officers, pre-K to 12th grade teachers, firefighters and emergency medical technicians. Each buyer must live in the home for 36 months.
Buying a fixer-upper with a VA loan
The Department of Veterans Affairs (VA) also offers low-interest home loans for 100 percent of the financing. Eligible veterans, active-duty service members, some National Guard and Reserve members and certain surviving spouses can use them. VA does not set a minimum credit score, but lenders can set their own. According to the VA website, a VA-backed purchase loan can “help you buy, build, or improve a home.”
These loans don’t require private mortgage insurance if you don’t have 20 percent down because the government backs them. Combined with the lower interest rate, that can mean a good deal of savings on the homeowner’s monthly mortgage payments.
McCalmon says that you can also get a VA EEM (energy-efficient mortgage) option.
VA energy efficient mortgages can finance the cost of qualifying energy improvements. Borrowers can finance up to $3,000 based on the documented cost. They can finance up to $6,000 if the added monthly payment is no more than the expected utility savings. VA does not allow more than $6,000, and appliances do not qualify.
Click here to check your VA loan eligibility (Nov 8th, 2026)
Can you get a conventional loan for a fixer-upper?
Other home buying options for rehabbing include a conventional mortgage. With this fixer-upper loan, you may be able to put as little down as 3 percent. Fannie Mae allows that on a fixed-rate loan for a one-unit primary home. Generally, a borrower must be a first-time buyer or use HomeReady. Then you can use the savings you might have used for a bigger down payment on some of the repairs.
“A lot of people still believe you have to put down 20 percent. But you don’t,” she says.
She warns people to not go overboard when rehabbing. “You don’t want to make a 3-bedroom home into a mansion when the whole neighborhood is average family homes,” she says.
Check your home buying eligibility. Start here (Nov 8th, 2026)
