Renovation loans in Texas: roll the repairs into your mortgage

An FHA Limited 203(k) rolls up to $75,000 of nonstructural work, such as a kitchen, flooring or a roof, into a purchase or refinance. A standard 203(k) handles larger and structural projects and requires a HUD consultant to oversee the work. Fannie Mae’s HomeStyle Renovation is the conventional version and allows projects FHA does not, such as a pool, for buyers with stronger credit. If you already own the home and have equity, a Texas home equity loan or cash-out refinance can fund the work, but total borrowing against the home is capped at 80 percent of its value (Texas Constitution, Article XVI, Section 50). I lay the options side by side for your project.

Yes, if you have the equity. In Texas both fall under Section 50(a)(6): total borrowing against the home is capped at 80 percent of its value, there is a 12 day wait before closing, closing happens at a lender, attorney or title office, and you can close only one of these loans every 12 months. A Texas HELOC also requires each draw to be at least $4,000. Whether that beats a renovation loan depends on your current mortgage rate and how much equity you have.

Yes, that is exactly what a renovation loan does. The loan is based on what the home will be worth once the work is complete, so you are not paying cash out of pocket for repairs on top of your down payment.

It ranges from cosmetic updates to structural work, kitchens, bathrooms, roofs, foundations, additions. The scope needs a contractor bid the lender can underwrite, so it is worth talking through your specific project before assuming what qualifies.

The rate is generally in line with a standard mortgage, the real difference is the process, an appraisal based on the finished value and documentation of the scope of work. I will walk you through exactly what that looks like for your project.

Start by deciding whether you are buying the home or refinancing one you own. Then get a contractor bid for the work, because the lender needs a defined scope. The lender orders an appraisal based on the home's value once the work is complete, and in most renovation programs the repair money is held and released in stages as the work gets finished. Not every lender on my panel offers renovation loans, so I match your project to one that does.

People use these names for the same idea: borrowing to pay for work on a house. A renovation loan rolls the work into your purchase or refinance mortgage in one loan. A home equity loan or line of credit borrows against equity you already have, and Texas has its own homestead rules on that. A personal loan or credit card is unsecured and usually costs more. My guide to home improvement loans in Texas compares them side by side.

Often yes, through a refinance that includes the cost of the work, or through a home equity option. Texas homestead rules limit how much can be borrowed against your home, so the right choice depends on how much equity you have and how large the project is. Tell me about the project and I will tell you which route fits.