Buying a Fixer-Upper in San Antonio: How to Pay for Repairs
The short answer: Many homes for sale in San Antonio are older and need some updating, so a fixer-upper is often the most realistic way into the neighborhood you want. You don't have to pay for the big repairs out of pocket. A renovation loan can cover the purchase and the repairs in one mortgage, based on what the home will be worth after the work is done.
Why so many San Antonio homes need work
In a lot of cities, buyers worry most about bidding wars. Here, the bigger challenge is often the house itself. Many of our established neighborhoods were built decades ago. Plenty of the homes for sale still have original plumbing, older electrical panels, or a roof and AC system near the end of their life. Our clay soil can also shift a foundation over time, and that comes up in inspections and appraisals more than most buyers expect.
None of that is a reason to skip older homes. They're often in neighborhoods with mature trees and bigger lots, at a lower price than something newer. It just means you need a plan for the repairs before you make an offer.
The plan most people start with, and where it can go wrong
Most buyers I talk with plan to buy the house as it is and fix it up over time. For paint, flooring or an outdated kitchen, that can work well. The trouble starts when the house needs repairs that affect safety or how sound it is.
A standard mortgage expects the home to be livable at closing. If the appraiser notes a foundation problem, failing plumbing or unsafe wiring, the lender may require those items to be fixed before closing. The seller may not be willing or able to do that, and the purchase can stall.
A family who almost lost the house
A young couple with two small children came to me after their purchase had stalled. They had found a house they liked at a very affordable price. Their plan was to move in and take care of the needed work a little at a time. Then the appraisal came back showing the home needed too much work, and the loan they had applied for couldn't move forward.
They were referred to me, and we set them up with renovation financing instead. One loan covered the purchase, the foundation, the plumbing and the electrical, plus some remodeling they wanted while the work was underway. They moved into a completely renovated home with nothing left on the to-do list. After the renovation, the appraised value gave them about $20,000 in equity from the start.
Not every renovation adds value dollar for dollar, and every house is different. But that's what can happen when the financing fits the house.
How a renovation loan works
A regular mortgage looks at the home as it is today. A renovation loan looks at what it should be worth once the work is done. Your contractor puts together a bid, and the appraiser uses those plans to give an "as-completed" value. The loan then covers the purchase price plus the cost of the repairs, within the program's limits.
The repair money doesn't come to you at closing. It's held in an account and paid to your contractor in stages as the work is finished and inspected. Most programs also set aside a contingency reserve, a cushion for surprises that show up once walls and floors are opened.
On larger projects, you'll also work with a HUD consultant. Most lenders require one once a renovation goes over $75,000, even on a conventional loan. The consultant inspects the house, writes up the full list of work and what it should cost, and reviews the contractor's bid against it. During the renovation, they come back before each payment to the contractor to confirm the work is done. It's one more person in the process, but they protect you and your loan. I'm glad to have them on the bigger jobs.
To keep the math easy, say a home is priced at $200,000 and needs $60,000 of work. With a renovation loan, your loan is based on the $260,000 total, or on the as-completed value if that's lower. Your down payment is figured on that total too, not only on the purchase price.
Your renovation loan options, from 203k to HomeStyle
FHA 203(k). The Limited 203(k) covers non-structural repairs up to $75,000, like a new roof, flooring, a kitchen update or new appliances. The Standard 203(k) handles bigger jobs, including structural work like foundation repair, and a HUD consultant oversees the project from the first inspection to the final payment. FHA can be more flexible on credit and down payment, but it doesn't cover luxury items like a pool.
Conventional renovation loans. Fannie Mae HomeStyle and Freddie Mac CHOICERenovation work much like a regular conventional loan with repair money built in. They can be used for second homes and some investment properties, and they allow upgrades FHA doesn't, like a pool or outdoor kitchen. On a purchase, the renovation budget is generally capped at 75% of the purchase price plus repairs, or of the as-completed value if that's lower. Larger projects usually bring in a HUD consultant here too.
VA renovation loans. Eligible veterans and service members can use their VA benefit to buy a home and repair it with one loan, often with no down payment and no monthly mortgage insurance. The loan is based on the home's as-completed value, and it's meant for repairs that make a home safe and livable, like the roof, foundation, plumbing or HVAC. Not many lenders offer it, and repair budgets vary from one lender to the next. Through NEXA Lending, I have several lenders to choose from, so I can match each buyer with the one that fits their project.
USDA renovation loans. In eligible areas, a USDA loan can also include repair money with the purchase, often with no down payment. Income limits and property location rules apply, and many communities around San Antonio's outer edges qualify. Like VA renovation loans, these aren't offered by many lenders. Having several to turn to makes a real difference when a family qualifies and the house needs work.
Escrow holdback. When a home is mostly in good shape and the appraiser flags only a few smaller items, some lenders will hold back money at closing to finish them afterward. The home still has to qualify close to its current condition.
Construction loan. If the home needs to be taken down to the studs or rebuilt, a construction loan may fit better than a renovation loan.
What to expect before you make an offer
Get pre-qualified for renovation financing specifically, not only for a standard loan.
Walk the house with your agent and a licensed contractor, and get a written bid.
Schedule the inspection early. On larger projects, the HUD consultant's inspection often takes the place of a regular home inspection, and their report becomes the list of work the contractor bids on.
Plan for a longer closing than a standard purchase, since the bid, consultant report and appraisal take extra time.
Plan where you'll live during the work. With foundation or plumbing repairs, many families stay where they are until the job is done.
Programs set deadlines for finishing the work, usually within about a year of closing, so your contractor's schedule matters.
Is a renovation loan right for you?
You really have three paths. Plan A is buying a home that's move-in ready, which usually means a higher price or a different neighborhood. Plan B is buying as-is and fixing things over time, which works for cosmetic updates. Plan C is a renovation loan, which takes care of the big items before you move in.
My opinion: if a house needs a roof, AC, plumbing, electrical or foundation work, I'd rather you handle it at closing than live with it while you save up. Renovation loans do involve more paperwork and a contractor bid up front. Whether that trade-off is worth it for your family is your call.
Frequently asked questions
What is a 203k loan?
A 203k loan is an FHA mortgage that combines the purchase price and the cost of repairs into one loan. The Limited 203k covers non-structural work up to $75,000, and the Standard 203k handles bigger projects, including foundation repairs, with a HUD consultant overseeing the work.
Can a renovation loan pay to fix a foundation?
Yes. A Standard FHA 203(k) and the conventional renovation loans can cover structural repairs like foundation work. The Limited 203(k) can't.
Do I need a bigger down payment for a renovation loan?
The minimum percentage is generally the same as the regular version of each loan. Because it's figured on the purchase price plus repairs, the dollar amount can be higher.
What credit score do I need?
It depends on the program and the lender. Most lenders don't ask for a higher score on a renovation loan than on a regular loan. These loans do carry more risk, though, since the home is being worked on after closing. Lenders often look at the whole file more closely, so steady income, savings and a clean credit history help.
Can I do the work myself?
Usually not. Most lenders require a licensed, insured contractor for the work.
Can I add a pool with a renovation loan?
Conventional renovation loans can include a pool. FHA 203(k) loans can't.
How long does closing take?
Longer than a standard purchase, mostly because of the contractor bid and the as-completed appraisal. Starting with a renovation-ready pre-qualification saves time.
If you've found a house that needs work, send it to me before you make an offer. I'm happy to walk through the numbers with you and see which option fits. You can see more about renovation loans here, and compare the FHA and conventional options.
Candy Williams, NMLS #187126, is a licensed loan officer with NEXA Lending, a mortgage broker with access to more than 300 lenders (NEXA NMLS #1660690). Equal Housing Opportunity. This article is for general education and is not a commitment to lend. All loans are subject to credit approval, property eligibility and program guidelines, which can change. Client details have been changed to protect privacy, and individual results vary.
