Renovation Loans in Indiana: FHA 203(k) & HomeStyle

Found a home in the right neighborhood that needs work — or want to update the house you already own without draining your savings? A renovation loan lets you roll the cost of repairs and improvements into a single mortgage, based on what the home will be worth after the work is done. Here is how FHA 203(k) and conventional HomeStyle renovation loans work in Indiana, and how to choose between them.

What is a renovation loan?

A renovation loan combines two things most buyers handle separately — the purchase (or refinance) and the cost of renovations — into one loan with one monthly payment. Instead of qualifying against the home’s current condition, you qualify against its “as-completed” value, the appraised value once the planned improvements are finished. That makes it possible to buy a dated or distressed property, fix it the way you want, and finance it all up front rather than reaching for high-interest credit cards or a second loan later.

FHA 203(k) renovation loans

The FHA 203(k) program is the most popular renovation loan for owner-occupants because it pairs flexible FHA credit guidelines with a low 3.5% down payment. It comes in two versions:

Limited 203(k)

For cosmetic and non-structural projects, the Limited 203(k) now allows up to $75,000 in repairs and improvements (HUD raised this from the old $35,000 cap). It is designed for quicker, simpler updates — new roof, HVAC, flooring, paint, kitchen and bath refreshes, and similar work that does not involve moving walls or major structural changes.

Standard 203(k)

For bigger or structural projects — additions, foundation or major systems work, or gut renovations — the Standard 203(k) has a $5,000 minimum and no fixed repair cap beyond your area’s FHA loan limit. It requires a HUD-approved 203(k) consultant to oversee the scope and draws, which adds a step but keeps large projects on track.

Conventional renovation loans: HomeStyle & CHOICERenovation

If you have solid credit and want to avoid FHA mortgage insurance, the conventional route is worth a look. Fannie Mae HomeStyle Renovation allows as little as 3% down with a 620+ credit score, and unlike FHA it can be used for primary homes, second homes, and investment properties. Renovation costs can run up to 75% of the as-completed value, and the work must be finished within 15 months. Freddie Mac CHOICERenovation is a close conventional alternative that can even count certain do-it-yourself “sweat equity” toward your down payment on one-unit homes.

203(k) vs. HomeStyle: which renovation loan is right?

As an independent broker, I compare both across multiple lenders so you land on the program — and the rate — that actually fits your project and finances.

What renovations qualify?

• Roofs, gutters, and downspouts
• HVAC, plumbing, and electrical repair or replacement
• Kitchen and bathroom remodels
• Flooring, painting (interior and exterior), and finishing
• Energy-efficiency upgrades — windows, doors, insulation
• Accessibility improvements and, on the Standard 203(k) or HomeStyle, structural work and additions

How the renovation loan process works

1. Get pre-approved so you know your budget for purchase plus renovation.
2. Find the home and get contractor bids for the work you want done.
3. Appraisal establishes the as-completed value the loan is based on.
4. Close — renovation funds are held in escrow, not paid out all at once.
5. Work is completed and the contractor is paid in draws as milestones are met.

Why renovation loans make sense in Central Indiana

Much of Indianapolis and the surrounding counties is built on established, older housing stock — solid homes in great locations that simply need updating. Renovation loans let you compete for those listings, including homes other buyers pass on, and turn them into exactly what you want while building instant equity. Whether you are a first-time buyer in Indy or a homeowner in Carmel, Fishers, or Noblesville planning a remodel, a renovation loan can be a smarter path than a separate high-interest loan. Building new instead? See our construction loans page.

Frequently asked questions

What is a renovation loan?

It lets you finance a home purchase (or refinance) plus the cost of repairs and improvements in a single mortgage, qualified on the home’s after-renovation value rather than its current condition.

How much can I borrow with an FHA 203(k) loan?

The Limited 203(k) allows up to $75,000 for non-structural work. The Standard 203(k) is for larger or structural projects, with a $5,000 minimum and no fixed cap beyond your area’s FHA loan limit.

What credit score do I need for a renovation loan?

FHA 203(k) loans are often available with scores around 580 and up (3.5% down), while conventional HomeStyle loans typically want 620+ (as little as 3% down). Exact requirements vary by lender.

Can I buy a fixer-upper with a renovation loan?

Yes — that is exactly what these loans are built for. You finance the purchase and the renovation together and qualify based on the home’s as-completed value.

203(k) or HomeStyle — which is better?

It depends on your situation. FHA 203(k) offers more flexible credit and a low down payment; HomeStyle avoids long-term FHA mortgage insurance and works for second homes and investment properties. I can compare both for your specific project.

Written by Greg Rank, independent mortgage broker at Channelwood Mortgage (NMLS #138276), serving Indianapolis, Carmel, Fishers, Noblesville, Westfield, Zionsville and all of Central Indiana. Thinking about a fixer-upper or a remodel? Call (317) 603-0912 to see which renovation loan fits your project.

This article is for general information only and is not a commitment to lend or financial advice. Loan programs, limits, and requirements depend on the lender, the property, and your qualifications, and are subject to change. Equal Housing Opportunity.