To secure a home renovation loan, start by assessing your credit score, as lenders typically require a minimum of 620-680 to qualify for favorable terms. Pre-approving with a mortgage lender ensures you know your budget and interest rate. Compare offers from banks, credit unions, and online lenders using tools like the Consumer Financial Protection Bureau’s (CFPB) loan calculator to identify the lowest interest rates and fees. Secure documentation such as proof of income, tax returns, and renovation plans from contractors. For government-backed loans like FHA 203(k) or VA loans, meet specific guidelines, including down payments (3.5% for FHA) and property eligibility.

This approach works because creditworthiness directly impacts loan approval and rates. The CFPB reports that 75% of lenders deny applications with scores below 620, and a higher score can reduce interest costs by up to 1%. Lender comparison saves money: a 2023 Federal Reserve study found borrowers save an average of $50,000 over 30 years by securing the lowest rate. Government loans like FHA 203(k) offer flexibility for minor to major renovations, with 40% of applicants using them for updates that increase home value by 5-15%, per the National Association of Home Builders. Accurate budgeting prevents overborrowing; the National Home Improvement Association notes 30% of projects exceed initial estimates, leading to loan defaults. Pre-approval also strengthens negotiation power, as 68% of contractors prioritize approved buyers.