A purchase plus improvements mortgage is structured differently from a standard home purchase mortgage. The lender approves the loan based on the property’s estimated value after the planned renovations are complete, not its current condition. This means you can borrow more than the purchase price to cover the cost of improvements, all within a single mortgage at a single rate.
The renovation funds are not released at closing. They are held and disbursed in draws as the work progresses and passes inspection. Most lenders require the renovations to be completed within 90 to 120 days of closing. Licensed contractors are typically required, and quotes must be submitted before approval.
This product is specifically for buyers purchasing a property that needs work. If you already own your home and want to finance renovations using your existing equity, that is covered under our home renovation mortgage page.
How the Purchase Plus Improvements Process Works
The purchase plus improvements mortgage process has more steps than a standard purchase mortgage, and preparation before the offer is critical.
Before making an offer, you need renovation quotes from licensed contractors for the planned improvements. Those quotes are submitted to the lender along with the purchase offer. The lender orders an appraisal based on the property’s estimated value after the renovations are complete. The mortgage is then approved based on that post-renovation appraised value, with the improvement funds held separately.
At closing, the purchase price portion is advanced as normal. The renovation funds are released in draws as work is completed and inspected, typically in one or two draws depending on the scope of the project. The renovations must be finished within the lender’s required timeline, usually 90 to 120 days from closing.
This program is popular with first-time home buyers who want to enter the market at a lower purchase price and build equity through improvements, rather than paying a premium for a fully finished property.
What Improvements Are Eligible
Most lenders will finance improvements that are permanently attached to the property and add to its appraised value. Common eligible improvements include kitchen and bathroom renovations, flooring, roofing, windows and doors, HVAC systems, basement finishing, electrical and plumbing upgrades, and accessibility modifications.
Cosmetic upgrades such as painting, landscaping, and appliances are sometimes eligible depending on the lender. Structural changes and additions are generally eligible but require more detailed documentation and longer timelines.
Improvements that are not attached to the property, furniture, moveable appliances, or general personal property are not eligible.
How Much Can You Borrow for Improvements
The improvement amount is added to the purchase price and the combined total is assessed against the post-renovation appraised value. Most lenders cap the improvement portion at the lesser of 10% of the purchase price or $40,000 for insured mortgages (those with less than 20% down). Some lenders allow higher improvement amounts for conventional mortgages with 20% or more down. The total mortgage cannot exceed 95% of the post-renovation appraised value for insured purchases.
Down Payment on a Purchase Plus Improvements Mortgage
The down payment is calculated on the total amount, purchase price plus improvement costs, not just the purchase price. For an insured mortgage, the minimum down payment is 5% on the first $500,000 of the total and 10% on the portion above that, up to $999,999. Properties at $1 million or above require 20% down and are not eligible for mortgage default insurance.
How Everything Mortgages Manages the Purchase Plus Improvements Process
The purchase plus improvements mortgage requires coordination between the buyer, the contractor, the appraiser, and the lender, and timing matters at each stage. We manage that coordination so the process does not create delays on closing day.
Before the offer is made, we confirm which lenders in our network offer purchase plus improvements products and what their documentation requirements are. We advise on the scope of improvements to include in the quotes based on the lender’s eligible improvement list and cap limits.
After the offer is accepted, we submit the contractor quotes and purchase details to the lender, coordinate the post-renovation appraisal, and manage the approval through to closing. After closing, we track the draw schedule and ensure renovation funds are released when the work is inspected and confirmed complete.
For buyers who want to continue renovating after the initial improvements are done, a mortgage refinance using the increased equity is the natural next step once the term allows.
What We Do for Purchase Plus Improvements Mortgage Clients
Pre-Offer Preparation
We confirm lender requirements before the offer is made, advise on which improvements are eligible and what documentation is needed, and help you understand the down payment calculation on the combined purchase and improvement amount.
Quote and Appraisal Coordination
We work with your contractor to ensure the renovation quotes are structured in the format lenders require. We coordinate the post-renovation appraisal with an accredited appraiser and submit all documentation to the lender as a complete package.
Approval and Closing Management
We manage the mortgage approval from submission through to closing, ensuring the purchase and improvement portions are correctly documented and the draw conditions are clearly established before the keys change hands.
Draw Management
After closing, we track the renovation draw schedule with the lender and help coordinate the inspection process so renovation funds are released on time and the project stays on track.
Why Buyers Use Everything Mortgages for Purchase Plus Improvements Mortgages
We Know Which Lenders Offer This Product
Not all lenders offer purchase plus improvements mortgages, and those that do have different improvement caps, eligible improvement lists, and draw requirements. We know which lenders in our network of 50+ institutions offer this product and whose criteria best match your project scope and purchase price.
Pre-Offer Guidance Prevents Delays
The most common reason purchase plus improvements applications run into problems is incomplete or incorrectly formatted contractor quotes submitted before the offer. We advise buyers on what lenders need before the offer goes in, which prevents documentation problems from delaying closing.
No Credit Pull on Initial Review
We do not pull your credit on the initial review unless you specifically request it. We assess your purchase price, improvement scope, and down payment position first, identify which lenders fit the file, and submit a credit application only when an approval path is confirmed.
How to Get Started with Everything Mortgages? Are you prepared to locate the ideal mortgage for your requirements?
Are you prepared to locate the ideal mortgage for your requirements?
Fill Out Our Online Form
Complete our online mortgage application with your basic financial details, the property purchase price, and an outline of the renovations you are planning. This gives us what we need to assess your eligibility and identify which lenders in our network offer purchase plus improvements products that fit your file.
Prepare Your Documents
Once we review your application, we send you a specific document list. For purchase plus improvements files this includes standard purchase mortgage documentation plus contractor quotes for the planned improvements. We advise on how quotes need to be structured to meet lender requirements.
Book a Consultation
One of our mortgage brokers walks through the full process, confirms which lenders fit your purchase price and improvement scope, and outlines the draw conditions and timeline requirements before any application is submitted. No obligation, no cost.
