Renovation Loans 101: HELOC vs. 203K vs. Homestyle

You’ve got the plans, the Pinterest board, and the design vision. Now you just need the cash to make it happen. If you’re not paying out of pocket, a HELOC or another type of renovation loan might be exactly what you need.

But let’s be real—loan options can feel like alphabet soup. 203K? HomeStyle? HELOC? Which one’s right for your kitchen or bath remodel?

Let’s walk through it together. This guide breaks down the three most popular types of home renovation loans so you can pick the one that fits your project best.

What Types of Renovation Loans Are Available?

What Is a Renovation Loan?

Renovation loans are designed to help pay for home improvements that a regular mortgage won’t cover. They’re perfect if you’re buying a fixer-upper or just want to upgrade the home you already love.

These loans bundle materials, labor, and design costs into one tidy package. That means fewer bills to juggle and a clearer view of your budget.

You can use a renovation loan for things like:

• Kitchen or bathroom remodels

• Accessibility improvements

• Fixing up an older home

• Structural repairs or additions

Now, let’s look at the three most common loan types.

Which Renovation Loan Is Right for Your Project?

FHA 203K Loans: Great for Fixer-Uppers

An FHA 203K loan combines a mortgage and renovation loan into one. It’s backed by the government and works well if you’re buying a home that needs repairs—or updating the one you’ve already got.

Two Options

• Limited 203K: Covers up to $35,000 in non-structural repairs (like painting, flooring, or fixtures).

• Standard 203K: Allows for bigger projects, including structural changes. But no luxury stuff like pools.

Pros

• Lower credit requirements

• Small down payment (as low as 3.5%)

• Great for buyers without a lot of equity

Cons

• More paperwork and longer closing times

• You have to use FHA-approved contractors

• Extra inspections slow things down

Fannie Mae HomeStyle Loans: More Flexibility

This conventional renovation loan is a good fit for bigger projects—and for people with solid credit. Unlike FHA loans, you can use a HomeStyle loan for second homes, rentals, or luxury upgrades like landscaping and high-end finishes.

Pros

• Higher loan limits

• Fewer restrictions than FHA loans

• Can be used on investment properties

Cons

• Requires higher credit and income

• Still involves inspections and approvals

• Funds are released after work is done, not before

HELOC: Home Equity Line of Credit

A HELOC lets you borrow money based on your home’s equity. It works a bit like a credit card—you draw what you need, when you need it, then pay it back over time.

This makes a HELOC ideal for smaller or phased renovation projects.

Pros

• Quick to open, often in just a few weeks

• Super flexible—you borrow only what you use

• Perfect if you already own your home

Cons

• Your home is the collateral (so there’s risk)

• Interest rates can go up or down

• Not ideal for large or full remodels

Which Renovation Loan Should I Choose?

Things you need to Apply for a Renovation Loan

Applying for a home improvement loan can seem like a lot—but it doesn’t have to be overwhelming. Start by pulling together the basics:

• Income docs and pay stubs

• Credit history

• A rough scope of work

• A contractor bid (some lenders ask for this upfront)

HELOCs are the fastest to close—usually within 1 to 3 weeks. FHA and HomeStyle loans take a little longer, around 30 to 60 days.

Talk to Your Contractor Early

Your contractor plays a huge role in the renovation loan process. Some don’t accept projects tied to 203K, HomeStyle, or HELOC loans because of the way payments are structured.

That’s why it’s super important to work with someone who’s familiar with renovation financing.

What Your Contractor Needs to Know

• Loan funds are paid in stages, not all at once

• Inspections are required before each draw

• Paperwork must be done right to avoid payment delays

If your contractor isn’t on board with this, it’s best to find someone who is.

How Payment Works

Most lenders need a written proposal with a breakdown of labor and material costs. Once approved, funds are released in two to four draws based on progress.

Loan inspectors check the work before each payment goes out. That’s a good thing—it keeps everyone accountable and on schedule.

Local Lender Options in Tallahassee

If you’re in the Big Bend area, the Building Industry Association of the Big Bend (BIABB) has a great directory of renovation-friendly lenders. A few to check out:

• Prime Meridian Bank – Offers mortgages and HELOCs with local insight

• University Lending Group – Great for first-time buyers and reno loans

You can browse the full BIABB directory here.

National + Online Lenders

Not in our area? Want a digital-first experience? Here are some solid options:

• RenoFi – Specializes in renovation loans

• Rocket Mortgage – Offers 203K and equity-based options

• SoFi – Great for HELOCs and personal loans

• Better.com – Fast online pre-approvals

Not Sure How Much Your Remodel Will Cost?

Try our Remodel Cost Calculator

Our cost calculator shows you real numbers for your future project—so you’ll know how much you might need to borrow.

Start Early for Less Stress

Renovation loans take time. Between choosing a lender, getting your paperwork in order, and syncing with your contractor, you’ll need a good head start.

If you’re hoping to renovate within the next 6–12 months, apply for your loan now. That way, you’ll have the time you need to make smart choices—and avoid last-minute stress.

Final Thoughts

Choosing the right home renovation loan depends on your timeline, budget, and how much flexibility you want. Whether you go with a 203K, HomeStyle, or HELOC, the key is to plan ahead and keep your contractor looped in from day one.

Still unsure what fits best? We’re happy to help. Reach out anytime to chat about your remodel, and we’ll point you toward the best financing options for your project.