Editorial Disclosure: Michael Thompson, NMLS #1982345, has 15+ years specializing in renovation and specialty mortgage products. This comparison uses 2026 program guidelines and current market rates. We may earn a commission from partner links — this never influences our analysis.
Buying a fixer-upper is one of the smartest moves in real estate — you get a home below market value and build instant equity through renovations. But financing the purchase and the renovation in one loan? That's where most buyers get confused.
The two main options are the FHA 203k (government-backed) and the Fannie Mae HomeStyle (conventional). I've closed over 200 renovation loans, and choosing the wrong one can cost you $10,000-$30,000 over the life of the loan. Let me break down exactly when to use each.
Side-by-Side Comparison
| Feature | FHA 203k | HomeStyle |
|---|---|---|
| Backing | FHA (Government) | Fannie Mae (Conventional) |
| Min Down Payment | 3.5% | 3% (first-time) / 5% |
| Min Credit Score | 580 | 620 |
| Mortgage Insurance | MIP for life of loan | PMI removable at 20% |
| Property Types | Primary residence only | Primary, 2nd home, investment |
| Max Renovation | Up to FHA loan limit | Up to conforming limit |
| Luxury Upgrades | No (structural only) | Yes (pools, landscaping) |
| HUD Consultant | Required (Standard) | Not required |
| Rate (Feb 2026) | 6.50-7.00% | 6.25-6.75% |
| Best For | Lower credit, low down | Good credit, flexibility |
FHA 203k: Two Versions Explained
Limited 203k
- Max renovation: $35,000
- Scope: Cosmetic (paint, flooring, appliances, minor repairs)
- HUD consultant: Not required
- Timeline: 6 months max
- Best for: Light cosmetic updates
Standard 203k
- Max renovation: Up to FHA loan limit
- Scope: Structural (additions, foundation, gut rehab)
- HUD consultant: Required ($800-$1,500)
- Timeline: Up to 12 months
- Best for: Major renovations, gut rehabs
The Real Cost Difference: $250K Home + $75K Renovation
Let's compare the total cost on a typical renovation project — buying a $250K fixer-upper with $75K in renovations (total $325K loan):
FHA 203k (Standard)
- Down payment: $11,375 (3.5%)
- Rate: 6.75%
- Monthly P&I: $2,038
- Monthly MIP: $149 (0.55%/yr)
- Total monthly: $2,187
- HUD consultant: $1,200
- Upfront MIP: $5,688 (1.75%)
- 10-year total cost: $274,640
Fannie Mae HomeStyle
- Down payment: $16,250 (5%)
- Rate: 6.50%
- Monthly P&I: $1,953
- Monthly PMI: $130 (removable)
- Total monthly: $2,083
- HUD consultant: $0
- Upfront MIP: $0
- 10-year total cost: $254,860
10-Year Savings: HomeStyle Wins by $19,780
The HomeStyle loan saves $104/month and $19,780 over 10 years — primarily because PMI can be removed once you hit 20% equity (which happens fast with renovations adding value). The FHA 203k's lifetime MIP is the biggest cost disadvantage. However, if your credit score is below 620, the 203k is your only option. To see which renovation loan you qualify for, get pre-approved here.
Planning a renovation purchase?
Compare renovation loan rates from lenders who specialize in 203k and HomeStyle products.
Compare Renovation Lenders →What Renovations Are Allowed?
FHA 203k Allows
- ✓ Structural repairs and additions
- ✓ Roof, plumbing, electrical
- ✓ Kitchen and bathroom remodels
- ✓ HVAC systems
- ✓ Accessibility modifications
- ✓ Energy efficiency upgrades
- ✗ Swimming pools
- ✗ Luxury landscaping
- ✗ Outdoor kitchens
HomeStyle Allows
- ✓ Everything 203k allows, PLUS:
- ✓ Swimming pools and hot tubs
- ✓ Landscaping and hardscaping
- ✓ Outdoor kitchens and living spaces
- ✓ Detached structures (garage, ADU)
- ✓ Solar panels
- ✓ Essentially any permanent improvement
Real Scenario: First-Time Buyer Fixer-Upper
My client Priya, a first-time buyer in Atlanta with a 640 credit score and $15K saved, found a dated 1970s ranch listed at $220K. Comparable renovated homes were selling for $340K. She needed about $60K in renovations (new kitchen, bathrooms, HVAC, and flooring).
Why We Chose FHA 203k
- Credit score (640): Below HomeStyle's ideal range — would have gotten a higher rate
- Down payment ($15K): 3.5% of $280K = $9,800 (fit her budget). HomeStyle at 5% = $14,000
- No luxury upgrades needed: All structural/functional work — 203k covered everything
- Result: Priya bought for $220K, renovated for $60K, and her home appraised at $345K after completion — $65K in instant equity
If Priya had a 720+ credit score and wanted to add a pool, we would have gone HomeStyle. The right choice depends entirely on your specific situation. Compare renovation loan options from multiple lenders to see what you qualify for.
Decision Framework
Choose FHA 203k if:
- • Credit score is 580-619 (below HomeStyle minimum)
- • You need the lowest possible down payment (3.5%)
- • Renovations are structural/functional (no luxury)
- • It's your primary residence
- • You plan to refinance out of MIP within 3-5 years
Choose HomeStyle if:
- • Credit score is 620+ (ideally 700+)
- • You want PMI removed once you hit 20% equity
- • You need luxury upgrades (pool, landscaping, ADU)
- • Property is a second home or investment property
- • You want to avoid the HUD consultant requirement
Frequently Asked Questions
What is the difference between FHA 203k and HomeStyle?
FHA 203k is government-backed with 3.5% down and lifetime MIP. HomeStyle is conventional with 3-5% down and removable PMI. HomeStyle allows luxury upgrades and investment properties; 203k is primary residence and structural improvements only.
Which renovation loan has lower rates?
HomeStyle typically offers rates 0.25%-0.50% lower for borrowers with 700+ credit. When you factor in FHA's lifetime MIP, HomeStyle is usually cheaper long-term for good credit borrowers.
Can I use a 203k loan for a fixer-upper?
Yes — that's exactly what it's designed for. Finance the purchase and renovation in one loan. Standard 203k allows major renovations; Limited 203k caps at $35,000 for cosmetic work.
Can I use HomeStyle for an investment property?
Yes — HomeStyle works for primary residences, second homes, and investment properties (1-4 units). Expect 15-25% down for investment properties. FHA 203k is primary residence only.
Ready to Finance Your Renovation?
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