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Renovate to Create Your Dream Home!

Thinking of buying a home that needs some work and turning it into the home you’ve always wanted? That’s a smart idea!

If you’re one of those homebuyers who can spot a residential diamond in the rough and envision everything that home could become, you may be surprised at the financial advantages:

  • You may get a bargain by paying less than market price
  • Bargain prices can get you into a more expensive area than you could otherwise purchase
  • You may be able to buy a larger home than you imagined
  • Improvements you make can increase the fair market value of your home
  • The renovated property will be done just the way you want it, reflecting your tastes and serving your needs

The PrimeLending renovation team has created this guide to help you make the most of your renovation project. Inside, you’ll find a helpful overview of the purchase-and-renovation process, along with tips on how to recognize both great potential and possible pitfalls in the properties you’re considering.

If you are looking to renovate your current property, PrimeLending offers a refinance & renovate program. This loan is a real solution for homeowners who want to increase their home’s value or make major repairs but have limited equity. You can spread the renovation costs throughout the term of the loan, with the loan amount based on your home’s value after you make the improvements.

For answers to any specific questions regarding renovation financing, just give us a call. You can contact a loan officer through your local PrimeLending office. Now, on to the good stuff about how to find, fund, and finesse your dream home!

What Is a Renovation Loan?

With a renovation loan, you finance the home purchase price plus the cost of repairs and/or updates. You can also refinance your existing mortgage plus the cost of repairs. With both of these options, you only have one application, one approval process, one loan closing and one mortgage payment.

A PrimeLending’s renovation loan enables you to make repairs and/or improvements right after closing, and the renovation costs are spread throughout the mortgage term. This type of financing is usually a better option than financing repairs and updates with a personal loan or credit card, which could feature higher interest rates

Our renovation loan programs are specially designed to provide a single loan that covers both the purchase price of a property and the costs of renovating it. The loan amount is based on the estimated increased value of your property after your planned improvements are made. That means you can start enjoying your home in the very near future, because you’ll have the funds you need to make the necessary repairs right away.

The benefits of our renovation loan programs include:

  • One Loan: The loan covers the purchase plus renovation costs or refinance amount.
  • Faster Finish: Renovation work can begin immediately after closing/funding.
  • Simplicity: Just one application, one closing, and one monthly payment.

What Kinds of Improvements Can be Made?


Renovations can be required repairs that bring a property up to minimum standards, comply with city or county codes, or satisfy appraisal requirements. Below are examples of required repairs:

  • Replace roof
  • Upgrade electrical
  • Plumbing repairs
  • Repair termite damage
  • Mold remediation
  • Interior or exterior paint
  • Ventilate attic and crawl space areas
  • Install smoke detectors
  • Foundation Repair


Renovations can also be optional repairs that will modernize, improve or upgrade a property. Below are examples of optional repairs:

  • Room addition
  • Kitchen update
  • Bathroom remodel
  • Repainting inside/outside
  • Siding
  • Energy-efficient improvements
  • New flooring
  • Landscaping (not available for all loan programs)

Who Can Use a Renovation Loan?

PrimeLending’s renovation loans offer the perfect financing options for people who:

  • Want to purchase a property that needs repairs or upgrades, such as:
    • Older homes that need energy-efficient updates and/or modernizing
    • REOs, foreclosures and short sales
  • Want to purchase a property that they like but don’t yet love because of changes or repairs that need to be made
  • Want to build upwards and outwards by refinancing their existing home and making repairs and/or updates, such as:
    • Update an outdated kitchen or bathrooms
    • Add a pool, deck or landscaping
    • Install new flooring or carpet


When you plan to purchase a home with a renovation loan, you will go through some steps.

Your PrimeLending loan officer will explain these steps in detail and serve as your trusted guide throughout the process. However, here is the process at a glance:

  • Get prequalified1 for a home loan by a PrimeLending loan officer
  • Select home you wish to purchase
  • Negotiate contract with seller
  • Find a contractor and get detailed bids on repairs and/or updates
  • For an FHA 203k Full loan, the lender will need to obtain the HUD consultant
  • For a Homestyle and Jumbo loan a structural engineer certificate may be required if renovations are structural or complex.
  • Appraisal is ordered subject to completion
  • Loan is submitted to underwriting
  • Underwriting approves loan
  • Loan closes
  • Funds disbursed and work is completed and inspected

Who Is Involved?

Renovating your home isn’t an experience you have to tackle on your own. There are professionals who can assist you every step of the way in making the most of this very important investment

  • Real estate agent
  • HUD consultant (for FHA 203k full loans)
  • Structural engineer certificate (for HomeStyle® and Jumbo Renovation loans)2
  • Contractor
  • Appraiser
  • Loan officer
  • Disbursement team

REAL ESTATE AGENTS make it their business to know everything about communities and the homes within them. A good real estate agent can:

  • Help you decide what you want in a home — communicating your desire to look at fixer-uppers is essential for your real estate agent to understand
  • Search the Multiple Listing Service (MLS) and other resources for homes that match your needs
  • Show you appropriate homes
  • Provide valuable information on communities, comparable values of neighboring homes, tax rates, and building code regulations
  • Help you formulate an offer on the home you wish to purchase
  • Act as an intermediary between you and the seller, smoothing the negotiating process

APPRAISERS determine the current market value of the home for sale. The appraiser will usually review at least three similar homes recently sold in the area, comparing their square footage, the number of bedrooms and baths, age, improvements, location, and condition. This provides a clear picture of the home’s current market value and its value after it’s renovated. Your purchase price, plus any improvement costs, should be equal to (or less than) the selling price of those comparable homes.

CONTRACTORS who actually will be performing the work are invaluable to the entire renovation project. On the next page, you will find tips about how to find and select a contractor, as well as important questions to ask about their work. You also will find information about city codes and permits.

THE HUD 203k CONSULTANT will conduct a site visit and feasibility analysis to determine whether minimum standards needed to be repaired as well as to understand the homebuyers/owners desired repairs. A good consultant will have knowledge of property values and repairs that can contribute to improving the property’s value and your potential equity in the property.

THE STRUCTURAL ENGINEER conducts a site visit to determine if the home is structurally sound to support the renovations. He/She will also look at the work from the repairs/renovations being made.

Just as contractors can make the renovation process smoother, so can your PrimeLending loan officer. As one of the nation’s leaders in renovation financing, we’re here to guide you through your renovation options and provide straightforward answers to your questions.

Who Is Responsible for What?


  • Examines bids and work plan; review with borrower and contractor
  • Ensures work meets program requirements and costs of repairs are reasonable/customary
  • Assures all required permits are obtained
  • Completes the HUD-92700, MMW (Maximum Mortgage Worksheet) when applicable
  • Determines contingency reserve percentage
  • Selects 203k HUD consultant (when applicable)


  • Selects contractor/bids and submits to lender
  • Obtains necessary permits, if not obtained by the contractor
  • Signs homeowner/contractor agreement


  • Meets all jurisdictional licensing and bonding requirements
  • Provides written cost estimate along with licensing, bonding and
  • Executes homeowner/contractor agreement
  • Obtains permits, if homeowner has not


  • Receives all cost estimates and list of work items
  • Provides an after-improved value
  • Performs final inspection to ensure work is completed as submitted

How Does the Contractor Get Paid?

Many buyers simply don’t have the expertise or time required to turn their fixer-upper into their ideal home. A good contractor may actually provide cost savings through economical purchase of materials, coordination of subcontracting work, and time saved. But how does the contractor get paid?


  1. The renovation may start once the mortgage loan closes/funds. Please note copies of the permit(s) should be forwarded to the draw center/Disbursement Analyst. Copies of the permit(s) are required along with the draw documents for the 1st draw to be processed. No draws will be released until proof of permits has been received.

  2. The PrimeLending’s Renovation Disbursement department will send a welcome email within 48hrs of the closing/funding date to both the borrower and the contractor that provides a brief summary of the draw process and assigned Disbursement Analyst’s contact info.

  3. The contractor and the borrower will need to work together to ensure that all permits and any other city/county requirements are in place and met before the renovation begins.

  4. The assigned Disbursement Analyst will follow up 10 days prior to the estimated completion date with both the borrower and the contractor, if a final inspection has not been ordered. Also, the assigned Disbursement Analyst will follow up with both the borrower and the contractor, if the renovation has not started within 30 days of the closing/funding date.

  5. The contractor is to provide draw documents when he/she is ready for a draw for the assigned Disbursement Analyst to order a progress inspection, depending on the type of holdback. We assumed the requested draw amount is in line with the overall completion. The Disbursement Analyst will review and calculate the max amount that can be disbursed to approve the requested draw amount. This scenario applies to Fannie Mae HomeStyle. All other Holdbacks except 203k Standard receives either 1 or 2 draws. The HUD consultant will be the responsible party to receive draw requests, complete inspections, and complete/submit draw documents to the assigned Disbursement Analyst for disbursements to be processed.

  6. All inspections are ordered through PrimeLending’s 3rd party inspection company, Trinity. The inspector will be assigned with the 1st inspection order and will complete all progress inspections (and final inspections, if it is 203k Limited or Fannie Mae HomeStyle). The inspector will receive notification from Trinity to contact the contractor and/or the borrower to inspect the property. The inspector will take photos of the renovation work and submit his/her photos to Trinity for the progress inspection report to be updated and sent to the assigned Disbursement Analyst. Please note it is very important to submit change orders when a draw is requested, if additional work has been completed. Also, repair items cannot be removed off the bid, unless approved by the appraiser.

    PrimeLending’s Renovation Department has connected with Home Depot, Lowe’s and Sears to provide an outlet for our customers so they will have a well-established contractor provide a bid. Contact your loan officer for more information.

  7. The assigned Disbursement Analyst will receive the progress inspection report from Trinity via email. He/she will review, calculate, and process the disbursement to the contractor within 24hrs of receiving the inspection report. Please note the draw documents and permits are to be submitted to the assigned Disbursement Analyst prior to the progress inspection order being placed. This helps avoid delays when processing the disbursement.

  8. Repeat numbers 5, 6, and 7 for subsequent disbursements, until the renovation is complete.

  9. The borrower and the contractor are to complete and submit the final draw documents, including the Letter of Completion to the assigned Disbursement Analyst for the final inspection and title date-down to be ordered except on 203k Standard Holdbacks. The assigned Disbursement Analyst will process the final disbursement within 24hrs of receiving the report. Please note a clear (100%) final inspection report and title date-down with no liens are needed to process the final disbursement and close out escrow. No other work can be completed while the renovation is being done. If so, it will cause the final to be incomplete and the final disbursement will not be processed, until the work is done and a clear (100%) final inspection is received. The borrower and the contractor will need to reach out to the HUD consultant for the final inspection and the final draw documents to be completed and submitted to the assigned Disbursement Analyst for processing on 203k Standard Holdbacks.

  10. The inspector/appraiser or HUD consultant will complete a final inspection report and send it to the assigned Disbursment Analyst via email for it to be reviewed and processed for final disbursement and include the retainage that was held with progress draws, if it is 203k Standard.