Renovation Loans in Clackamas County, Oregon

The short answer: Renovation loans in Oregon let you finance a home purchase and the repair work in one mortgage. The loan is sized on what the property will be worth once the work is done. The two common paths are the FHA 203(k) and Fannie Mae's HomeStyle Renovation loan. Limited 203(k) allows up to $75,000 of rehabilitation work.

What Renovation Loans in Oregon Actually Do

A normal purchase loan looks at the house as it sits today. If the appraiser flags a failed roof or a missing furnace, that becomes your problem before closing. Usually you solve it with cash you were not planning to spend.

Renovation loans in Oregon work from a different number. The appraiser gives an opinion of value based on the plans and the contractor bid. That figure is called the "as completed" value. It is what the house is expected to be worth once the described work is finished. Your loan is sized against that figure instead of against the tired version you toured.

The repair money does not come to you at closing. It goes into an escrow account, which is a third-party account the lender controls. The money is released in stages as the work gets done. Each of those releases is called a draw. Understanding the draw schedule is most of what separates a smooth renovation file from a miserable one. It is also the piece that changed this June.

One honest caveat before the details. These loans carry more moving parts than a standard purchase. There are contractor bids, a scope of work, inspections, and a timeline the lender enforces. They are worth it when the house is right and the cash is not there. They are not worth it for cosmetic wants you could save for.

FHA 203(k): The Renovation Loan Most Clackamas County Buyers Use

The FHA 203(k) program comes in two versions, and picking the wrong one costs weeks.

Limited 203(k) is the lighter path. It covers non-structural work. Think a kitchen, bathrooms, flooring, windows, a roof, or a furnace and heat pump swap. Mortgagee Letter 2024-13 raised the maximum rehabilitation amount from $35,000 to $75,000. It also extended the rehabilitation period from six months to nine. Those terms applied to FHA case numbers assigned on or after November 4, 2024. The $75,000 ceiling is now reviewed each year alongside FHA's loan limit announcement. Confirm the current figure with me rather than trusting a number you read last year.

Standard 203(k) is for larger projects, structural work, and anything that requires a HUD consultant. There is no $75,000 ceiling on the Standard version. There is more process, and there is a consultant fee.

Both versions sit inside the regular FHA framework, so the same mortgage insurance and credit rules apply. For how FHA works generally, start with my page on FHA home loans in Clackamas County. Eligibility for either version is subject to underwriting, credit approval, and a full loan estimate.

One thing I will not do here is list what counts as an eligible improvement. FHA revised that section of its handbook in 2026 and the details matter too much to paraphrase. Send me the scope and I will read the current rule against your actual project.

The June 2026 Draw Rule Change on FHA Renovation Loans

This is the freshest piece of this topic, and almost nobody has written it up yet.

Mortgagee Letter 2026-06 is dated June 23, 2026 and took effect immediately. It increased the maximum number of draw requests on the Limited 203(k). The letter allows a lender to approve a maximum of four draw requests per contractor. The same count applies to the borrower acting as the contractor. Those four are the initial draw at closing, no more than two intermediate draws, and the final draw. Each draw may include up to two separate disbursements, and a draw with two disbursements still counts as one draw.

The Standard 203(k) draw count did not go up. It stays at a maximum of five draw requests, four intermediate and one final. What FHA clarified is that each of those draws may include multiple disbursements. A draw with multiple disbursements still counts as one draw.

HUD explained the change plainly. The old draw framework was written for smaller rehabilitation budgets. Once the Limited ceiling moved to $75,000, contractors carried larger cash gaps between releases. Those gaps were driving project delays and, in some cases, abandoned jobs.

Here is why that matters in Oregon City or Milwaukie. Contractor availability is the real constraint on these projects, not the loan. A good local contractor who has been burned by a slow-paying renovation file will decline the next one. A draw schedule that pays closer to the pace of the work changes that. It is easier to get a bid from someone you actually want in your house.

Conventional Renovation Loans: Fannie Mae HomeStyle

FHA is not the only route. Fannie Mae's HomeStyle Renovation loan is the conventional equivalent. It suits a borrower who would rather avoid FHA mortgage insurance. It also reaches second homes and investment property.

The sizing rule is different from FHA's. On a purchase, HomeStyle renovation funds may not exceed 75 percent of the lesser of two numbers. Those are the purchase price plus renovation costs, or the "as completed" appraised value. On a refinance, the limit is 75 percent of the "as completed" appraised value. Manufactured homes are held to a tighter 50 percent of "as completed" value.

HomeStyle also has a do-it-yourself option, which the 203(k) does not handle the same way. Borrower-performed work is capped at 10 percent of the "as completed" value. The lender has to approve the renovations in advance and inspect any item over $5,000. You cannot be reimbursed for your own labor, only for materials or for properly documented contract labor. Sweat equity does not convert into loan proceeds.

Freddie Mac runs a comparable product called CHOICERenovation. The two are similar in concept and differ in the details. Which one is available depends on the lender and the investor on the day you apply. Because I am a broker rather than a single institution, I can look at both sides. My page on working with a mortgage broker in Clackamas County explains what that changes here.

Deciding between the FHA and the conventional route is its own question. My FHA versus conventional comparison covers the general trade-off, and the renovation versions inherit most of it.

Which Renovation Loan Fits an Older Milwaukie or Oregon City House

This is where the county's housing stock matters. Clackamas County is not one market.

Historic Milwaukie, Island Station, Lake Road, and Ardenwald hold mid-century and prewar houses on good lots. Several of those pockets sit near the Trolley Trail and the MAX Orange Line. Oregon City has older stock again, some of it genuinely historic above the falls. These are the neighborhoods where a renovation loan earns its keep. The bones are good, the systems are old, and the price reflects the systems. Read more about each market on my Milwaukie home loans and Oregon City home loans pages.

Happy Valley is the opposite case. The stock is newer and largely master-planned, so a renovation loan is rarely the tool there.

A rough sorting rule I use on the phone. If the work is cosmetic and mechanical and lands under the Limited ceiling, take the Limited 203(k) or HomeStyle. Moving walls, touching the foundation, or adding square footage puts you in Standard 203(k) territory. That version needs a fuller plan set. If the house is bank-owned and sold as-is, a renovation loan is often the only financed offer that works.

The appraisal drives more of this than people expect. My guide to home appraisals in Clackamas County walks through what the appraiser is doing.

Loan Limits That Cap Renovation Loans in Clackamas County

Your total loan, purchase money plus renovation money, still has to fit inside a program limit. For 2026 in Clackamas County, on a one-unit property:

Those two numbers are not interchangeable, and the gap between them is the single most common surprise on a Clackamas file. The conforming figure sits at the national baseline because the Portland metro receives no high-cost adjustment. The FHA figure is calculated from the area median price and lands well below it.

The practical effect on a renovation project is real. A $650,000 house needing $60,000 of work totals $710,000. That clears the conforming limit and misses the FHA one. My Clackamas County jumbo loan checklist shows both figures with the source links. If you are near that line, call me before you write the offer.

Homeowners already in a house have a fourth option worth naming. If you have equity and the work is not urgent, a cash-out refinance can fund a remodel. There is no renovation escrow, no contractor bid package, and no draw schedule. It is a simpler transaction, subject to equity and credit approval, and for some projects it is the better answer.

How to Start a Renovation Loan in Clackamas County

1. Get pre-approved on the base purchase first. Why it matters: the renovation budget stacks on top of a loan you have to qualify for anyway. Knowing the ceiling before you shop keeps you from falling for a project you cannot finish. Start with how much house you can afford in Oregon.
2. Walk the house with the scope in mind. Why it matters: separating structural from non-structural work decides Limited versus Standard. That decision changes your timeline by weeks.
3. Line up a contractor early. Why it matters: the lender needs a licensed contractor with a written bid. Good contractors in this county book out. This is the step that delays files, not the underwriting.
4. Let the appraiser see the plans. Why it matters: the "as completed" value comes from the bid and the scope. An incomplete scope produces a low value and a smaller loan.
5. Agree on the draw schedule before you close. Why it matters: your contractor is planning cash flow around it. Under the June 2026 rules a Limited 203(k) has four draws to work with, and a Standard has five.
6. Hold the timeline. Why it matters: the Limited 203(k) rehabilitation period runs nine months. It sounds generous in month one and it does not in month seven.

I am a solo broker and I answer my own phone. The person who sets that plan with you is the person who follows it through closing.

Frequently Asked Questions About Renovation Loans in Oregon

How much repair work can a Limited 203(k) cover?

Up to $75,000 of rehabilitation. FHA Mortgagee Letter 2024-13 raised the Limited 203(k) maximum from $35,000 to $75,000 and extended the rehabilitation period from six months to nine months, for FHA case numbers assigned on or after November 4, 2024. That ceiling is now re-evaluated each year alongside FHA's nationwide forward mortgage loan limits, so confirm the current figure before you build a budget around it. Projects above the ceiling, or any structural work, move to the Standard 203(k), which has no equivalent rehabilitation cap.

How many draws do I get on a 203(k) renovation loan?

Mortgagee Letter 2026-06, dated June 23, 2026 and effective immediately, allows a lender to approve a maximum of four draw requests on a Limited 203(k) per contractor, or for the borrower acting as the contractor. Those consist of the initial draw at closing, no more than two intermediate draws during the rehabilitation, and the final draw. Each draw may include up to two separate disbursements, and a draw with two disbursements counts as one draw. The Standard 203(k) allows a maximum of five draw requests, four intermediate and one final, and each of those may include multiple disbursements.

What is the difference between a 203(k) and a HomeStyle renovation loan?

The 203(k) is the FHA program and carries FHA mortgage insurance and FHA loan limits, which in Clackamas County means $701,500 on a one-unit property for 2026. HomeStyle is Fannie Mae's conventional renovation loan and follows the conforming limit, which is $832,750 for a one-unit Clackamas County property in 2026. HomeStyle sizes renovation funds at up to 75 percent of the lesser of the purchase price plus renovation costs or the "as completed" appraised value, and it allows borrower-performed work up to 10 percent of the "as completed" value. Which one fits depends on your credit profile, your down payment, and the property type, and eligibility for either is subject to credit approval and a full loan estimate.

Can I do the renovation work myself?

On a Fannie Mae HomeStyle loan there is a do-it-yourself option, capped at 10 percent of the "as completed" value of the property. The lender must approve the renovations in advance and must inspect any item that exceeds $5,000. You cannot be reimbursed for your own labor. Reimbursement is limited to materials or to properly documented contract labor, so sweat equity does not turn into loan proceeds. On the FHA side, borrower-performed work is handled differently and is more restricted, so bring me the specific plan rather than assuming it will be allowed.

How long do I have to finish the work?

The Limited 203(k) rehabilitation period is nine months, extended from six months by Mortgagee Letter 2024-13. That clock starts at closing, not when your contractor gets around to the job, which is why lining up the contractor before you close matters more than most buyers expect. Conventional renovation programs set their own completion requirements, and your lender will state the applicable period in the renovation agreement you sign at closing.

Can I use a renovation loan on a bank-owned or foreclosed house in Clackamas County?

Often yes, and it is one of the more common reasons to use one. Bank-owned properties are typically sold as-is, and the condition issues that make a standard purchase loan difficult are the same issues a renovation loan is designed to finance. The practical obstacles are timeline and competition rather than eligibility, because a seller weighing a cash offer against a financed one cares about certainty of closing. Getting fully pre-underwritten before you offer is what makes a financed offer competitive on that kind of property. Eligibility is subject to the property type, the program, underwriting, and credit approval.