The Spokane home you like has the right location and layout, but it needs a roof, updated kitchen, or major repairs. You could make an offer and hope to pay for the work later. That plan may fail if the property does not meet your loan program’s condition requirements or if the repairs cost more than the cash you have left after closing.
A renovation mortgage offers another path: it can combine an eligible home purchase and approved improvement costs into one financing plan. The work, budget, contractor, appraisal, and loan approval all need to fit together. You should understand those pieces before making an offer.
This guide is about purchasing an existing home and improving it. If you are buying land and building a new home, see The Wells Group’s separate Spokane construction financing guide.
Why a Standard Purchase Loan May Not Be Enough
With a conventional home purchase, buyers often think of repairs as something they can address after they get the keys. That may be fine for a qualifying property and minor upgrades. Serious condition problems are different.
The lender evaluates the property as collateral. An appraiser may identify repairs that affect the loan program’s standards, and a buyer’s home inspector may uncover a broader scope of work. The Consumer Financial Protection Bureau (CFPB) explains that a lender can require major repairs before closing or, in certain circumstances, funds in a special account for repairs afterward.
The purchase contract may permit negotiation with the seller, but a seller credit does not by itself resolve property eligibility. Nor does a low purchase price guarantee that a property with safety or structural issues can close under an ordinary mortgage.
Ask your lender about the property’s likely financing path early, before a contractor estimate or inspection contingency deadline forces a rushed decision.
What a Renovation Mortgage Does
A renovation mortgage can finance the home purchase and an approved repair or remodeling plan in one transaction. The lender reviews the borrower, property, project scope, costs, and anticipated value after the work. Renovation funds are typically controlled through a process rather than handed to the buyer as unrestricted cash.
The Wells Group lists a renovation mortgage option among its programs. The available products and exact requirements can vary, so ask Laura Wells which renovation structure is currently offered for your proposed home and work.
Two established program families worth discussing are:
- Fannie Mae HomeStyle Renovation. This conventional program can include eligible repairs and improvements in a purchase or refinance mortgage. Fannie Mae describes a lender review of the project, an as-completed appraisal, a renovation agreement, oversight of draws, and final completion verification in its HomeStyle Renovation overview.
- FHA 203(k). HUD’s 203(k) program has a Limited version generally intended for less extensive work and a Standard version for major rehabilitation. The permitted work, oversight, timing, mortgage insurance, and other rules depend on the version and lender.
These are examples of renovation financing, not a representation that a particular Wells Group loan or property qualifies for either one. Ask for a program-specific review.
Begin With the Work, Not Just the Listing Price
Before comparing rates, write a clear scope of work. Is the issue cosmetic, mechanical, structural, or a combination? A kitchen refresh and a failing foundation require different contractors, timelines, permits, and financing checks.
Your initial budget should account for:
- The contractor’s itemized estimate.
- Permits and professional plans, if needed.
- Required inspections or program administration.
- A contingency for work discovered after walls or floors are opened.
- Housing costs if the home cannot be occupied during renovations.
The lender determines which items can be financed, what reserve is required, and how project changes are handled. Do not assume an online remodeling estimate includes every loan-related cost or that you can add unlimited work after closing.
If the listing says “needs a little TLC,” ask for a qualified inspection rather than treating that phrase as a repair budget. Water intrusion, aging electrical systems, and unpermitted work can materially change the project.
The As-Completed Appraisal
A renovation loan may evaluate the home based on what it is expected to be worth after approved improvements, subject to program rules. Fannie Mae’s HomeStyle process calls for an as-completed appraisal that helps determine the maximum mortgage amount.
That does not mean every dollar of renovation cost adds a dollar of value. An appraiser considers the proposed work and comparable properties under the applicable standards. If the as-completed value is lower than expected, the financing plan may need a smaller scope, more buyer cash, a lower purchase price, or a different program.
For example, imagine an existing home priced at $360,000 with a preliminary $80,000 repair plan. Do not simply assume the lender will approve a $440,000 project value. The appraisal, eligible cost calculations, down payment, loan limits, and underwriting determine the approved amount. The example is illustrative and is not a quote or a statement about Spokane prices.
Contractor Approval and Draws
With renovation financing, your choice of contractor affects more than build quality. The lender may review contractor credentials, insurance, scope, estimates, payment schedule, and ability to complete the work. Fannie Mae notes that HomeStyle contractors are subject to lender review.
Ask these questions before promising a contractor a start date:
- What documentation must the contractor provide?
- Can the contractor receive an advance, and under what conditions?
- When are progress payments released?
- What inspection is needed for each draw?
- Who approves a change order if hidden damage appears?
- What happens if the contractor cannot finish on time?
- Are there restrictions on work you want to do yourself?
Contractors accustomed to cash jobs may not want to wait for a lender-controlled draw. Discuss the payment process with them at the bidding stage. A signed bid that conflicts with the mortgage’s disbursement rules can delay both closing and construction.
Limited Repairs or Major Rehabilitation?
The project scope helps determine the right financing path. HUD’s 203(k) program description separates the Limited option, for smaller eligible repairs or improvements, from the Standard option, for more extensive rehabilitation. Its current program page describes a Limited 203(k) repair ceiling, but dollar caps and detailed conditions can change. Have your loan officer check the current HUD and lender rules rather than planning around an old article’s threshold.
HomeStyle Renovation is a different conventional program with its own borrower, property, project, and lender requirements. Fannie Mae’s program materials list examples such as roofing, plumbing, painting, and, when eligible, an accessory dwelling unit. Approval for a specific project still belongs to the lender under the applicable rules.
Do not force a structural job into a program intended for limited, nonstructural work. And do not assume a cosmetic renovation loan is necessary for a house that is already eligible for ordinary financing. A side-by-side comparison can reveal whether paying for improvements separately is more practical.
Can You Live in the Home During Renovation?
That depends on the condition of the house, the scope and sequence of work, local requirements, and the mortgage program. A bathroom update might allow occupancy; major electrical or structural repairs might not.
Fannie Mae says its HomeStyle Renovation program does not require the property to be habitable at closing, subject to the program’s terms. That does not eliminate the cost of temporary housing. Ask whether any eligible payment reserve is available for your specific transaction, what it covers, and how financing it affects the balance and payment.
If you need to rent somewhere while work is underway, calculate both obligations. Also check when homeowners insurance must begin and what coverage applies while the property is under construction.
A Purchase Timeline That Includes the Renovation
A fixer-upper can have two clocks: the real estate contract and the renovation approval process. A sensible sequence is:
- Before the offer: Discuss financing and the likely scope with a loan officer who handles renovation mortgages. Understand the maximum purchase and project budget.
- After the offer is accepted: Inspect the property promptly and gather detailed contractor bids and any required plans.
- Before final loan approval: Confirm contractor eligibility, the work write-up, appraisal, contingency, and loan terms.
- At closing: Review the renovation agreement, escrow or custodial account, draw process, and deadlines.
- After closing: Complete work under the approved plan, document changes, and satisfy required inspections and final sign-off.
This is a planning sequence, not a guaranteed schedule. The contract’s inspection and financing deadlines must allow enough time for the necessary reviews. Coordinate your real estate agent, contractor, and mortgage team as soon as a major repair becomes apparent.
The Wells Group’s mortgage process overview explains the ordinary documentation, appraisal, and underwriting stages. A renovation loan adds project documentation to those stages.
Compare the Entire Financing Plan
Do not choose a loan solely because it appears to roll every expense into one payment. Compare:
| Cost or risk | Question to ask |
|---|---|
| Upfront funds | What down payment and closing cash are required? |
| Monthly payment | What is the payment with taxes, insurance, and any mortgage insurance? |
| Repair funds | Which costs are approved, and how are they disbursed? |
| Contingency | How much is reserved for unexpected work? |
| Contractor timing | Can the contractor meet the lender’s milestones? |
| Temporary housing | What will you pay while the home is not usable? |
| Long-term balance | How much of the purchase and renovation cost will you still owe in five years? |
If a seller is willing and able to complete a specific repair before closing, compare that option too. If the property is already financeable and the work is optional, a standard purchase loan plus a later renovation plan may fit better. The lender, contract, and your available cash determine what is practical.
Questions for Laura Wells Before You Offer
Bring the listing, known inspection information, photographs, and a preliminary list of work. Ask:
- Which renovation loan programs can The Wells Group currently originate for this property?
- Would a standard purchase mortgage be possible as the home stands?
- What kinds of repairs are eligible and which are required?
- How much detail must a contractor bid contain?
- Does the lender need an as-completed appraisal?
- What reserve or contingency is required?
- How are draws, change orders, and final inspections handled?
- What contract and construction timelines should the agent plan around?
Laura Wells, NMLS #330328, leads The Wells Group in Spokane and can help you test the financing plan before you commit to a purchase. Start with the team’s loan programs or contact The Wells Group at 601 W Riverside Ave, Suite 750, Spokane, WA 99201.
Frequently Asked Questions
Can I buy a house that does not qualify for a standard mortgage?
Possibly. A renovation mortgage can be designed around approved repairs, but the property and project must meet that program’s requirements. Ask a renovation lender to review the specific condition rather than assuming any distressed home can be financed.
Can renovation funds pay for anything I want?
No. Work must fit the selected program and approved scope. The lender controls documentation and disbursement. Personal spending and unapproved projects are not simply cash you can take from the renovation account.
Do I need a contractor before applying?
You can discuss financing early, but a credible, itemized scope and contractor information are generally needed to finalize the renovation plan. Ask your lender when contractor selection and approval must be complete.
Will the lender base the loan only on today’s value?
Some renovation programs use an as-completed appraisal as part of determining loan size, alongside other eligibility calculations. A projected value is not a guarantee that the entire budget will be financed.
Is a renovation loan the same as a construction loan for vacant land?
No. A renovation loan generally starts with an existing eligible property and an improvement plan. Land purchase and a new build have separate underwriting and construction issues.
Make the Repair Plan Part of the Offer
Buying a fixer-upper near Spokane can be rewarding when the purchase price, true repair scope, contractor, loan program, and completed value align. Inspect early, get detailed bids, leave room for surprises, and give the lender enough time to review the project before contract deadlines arrive.
This article is general educational information reviewed in October 2026. It is not a loan approval, construction estimate, or guarantee that a program is available for a particular property. Program guidelines, costs, limits, and lender requirements can change. Confirm current details with The Wells Group and qualified inspection and construction professionals.
