Every renovation loan officer remembers the first time the phone rang with a genuine renovation lead.
On the other end of the line is an excited borrower who has finally found the fixer-upper they’ve been dreaming about. They’ve already chosen the flooring, picked out the kitchen cabinets, and can practically picture themselves enjoying coffee on the back deck after the renovations are complete.
Meanwhile, your mind is racing.
What do I say?
Where do I even begin?
Maybe you’ve completed training. Maybe you’ve read the guidelines and feel reasonably comfortable with the loan programs. You’ve even started promoting renovation loans. But now that your first borrower is on the phone, all of that preparation slips from your mind and you completely freeze.
If you’ve ever experienced that moment, you’re not alone. We’ve all been there.
The good news is that borrowers aren’t expecting you to be a renovation loan expert capable of sharing every last guideline. They’re looking for something much more valuable.
They’re looking for someone who can confidently guide them through a process they’ve never experienced before.
That realization changed the way I approached every renovation loan conversation throughout my career.
Start with the Project, Not the Loan Program
One of the biggest mistakes I see loan officers make is jumping directly into loan programs before they understand what the borrower is actually trying to accomplish.
Borrowers don’t call because they want an FHA 203(k) loan or a HomeStyle® Renovation loan.
They call because they found a house they love.
Or because they’ve outgrown the one they already own.
Or because they want to transform an outdated property into the home they’ve been imagining for years.
The loan program is simply the vehicle that helps them get there.
That’s why I always began with questions rather than explanations.
For purchase transactions, I wanted to understand the basics.
Are you already under contract?
What is the purchase price?
What improvements are you hoping to make?
How much do you think those improvements will cost?
Has your real estate agent discussed what the property might be worth after the renovations are complete?
Notice what I wasn’t asking for.
I didn’t expect a contractor’s bid. I didn’t need exact numbers.
At this stage, verbal estimates were perfectly acceptable. The objective wasn’t to underwrite the loan during the first phone call. It was to understand the vision.
Refinances Require a Slightly Different Conversation
When speaking with homeowners interested in refinancing, my questions shifted slightly. Instead of asking about a purchase contract, I wanted to understand their existing situation.
How much do you currently owe on your home?
What improvements are you planning?
How much do you believe those improvements will cost?
What do you think your home is worth today?
What do you believe it will be worth after the renovations are complete?
If borrowers didn’t know the answer to that last question, that was perfectly fine. I simply encouraged them to do a little research.
The property’s future value—often referred to as the subject-to or as-completed value—plays an important role in determining whether the renovation makes financial sense.
Sometimes those conversations revealed that borrowers were planning improvements well beyond what the neighborhood could support. And discovering that early benefits everyone involved. Borrowers avoid spending time and money pursuing a loan that may never work, and lenders avoid investing valuable resources in projects that are unlikely to reach the closing table.
Just as importantly, don’t forget to consider county loan limits as you’re estimating how much financing the borrower may ultimately need. It’s far better to identify those limitations during the first conversation than after everyone has already invested significant time in the transaction.
The Borrowers Who Taught Me the Most
Years ago, I worked for a lender that specialized exclusively in renovation lending.
Every morning I would arrive at my office in downtown Indianapolis, settle in at my desk overlooking the city, and begin returning the renovation inquiries that had come in overnight.
Day after day, I had remarkably similar conversations. And eventually, I began noticing something.
The borrowers who experienced the smoothest transactions weren’t necessarily the ones with the highest credit scores. They weren’t the ones with the largest down payments. They weren’t even the ones who had spent weeks researching renovation loans before picking up the phone.
They were the ones who were teachable.
They listened. They asked thoughtful questions. They trusted the process.
That observation changed the way I viewed my role as a loan officer.
I realized that setting expectations wasn’t simply good customer service. It was one of the most effective risk management tools available to a renovation lender. Borrowers who understood the process made better decisions. They anticipated potential delays. They communicated more effectively with contractors. They experienced fewer surprises. And ultimately, they helped our team move loans through the process more efficiently.
Once You Understand the Project, Then Talk About Financing
Only after I understood the renovation project did we begin discussing financing.
Some borrowers assumed they needed one loan to purchase the property and another source of financing for the renovation itself. One of my first goals was eliminating that misconception. I explained that renovation loans combine both the property and the planned improvements into a single mortgage with one monthly payment. That simple explanation immediately reduced confusion.
From there, we could begin discussing which loan programs best matched their circumstances. We compared down payment requirements, mortgage insurance, interest rates, and cash needed at closing.
Along the way, I made sure to explain one detail that surprises many first-time renovation borrowers. Their down payment is typically based on the purchase price plus the renovation costs—not simply the purchase price of the home. That’s a conversation borrowers appreciate having before they’re sitting at the closing table.
I also explained which costs could generally be financed as part of the renovation loan and which expenses they should expect to pay as services were performed.
For example, certain professional services and renovation costs—such as architectural or engineering fees, draw inspection fees, permits, and title updates—may be financed.
Other expenses, including appraisal fees, home inspections, well or septic inspections, and Consultant fees, are frequently paid upfront.
Helping them understand the timing of those expenses early in the process eliminates unnecessary frustration later.
For borrowers purchasing a home with limited available cash, we also discussed whether financing mortgage payment reserves might make sense during the renovation period. Every situation is different but introducing that option early gave borrowers a more complete understanding of the tools available to them.
By the end of that financing conversation, my objective wasn’t simply to recommend a loan program. It was to help borrowers understand how the financing supported the renovation they were hoping to accomplish.
Walk Borrowers Through the Journey, Not Just the Loan
Once borrowers understood how the financing worked, I shifted the conversation from what they were financing to what would happen next.
One of the biggest sources of anxiety for first-time renovation borrowers isn’t qualifying for the loan. It’s simply not knowing what comes next.
They don’t just want to know what happens. They want to know when it happens. More importantly, they want to understand what they’re responsible for throughout the process. That’s where expectation setting becomes invaluable.
For purchase transactions, I walked borrowers through the renovation journey step by step.
First comes pre-approval.
Once a purchase agreement is in place, the borrower selects a contractor and obtains a detailed bid.
If required by the loan program, a Consultant is engaged or a feasibility study is ordered.
The appraisal follows.
Underwriting reviews both the credit package and the renovation package.
Conditions are cleared.
The loan closes and funds.
Only then can the renovation begin.
Borrowers often breathe a sigh of relief once they realize there is a logical sequence to the process. What initially felt overwhelming becomes much more manageable when it’s presented as a roadmap rather than a collection of disconnected requirements.
Explain Responsibilities Before They Become Problems
Walking borrowers through the process also creates the perfect opportunity to explain their responsibilities.
These conversations may only take a few minutes, but they prevent countless misunderstandings later.
For example, I always asked whether the borrower planned to complete any of the work themselves. Some loan programs—and some lenders—allow various forms of self-help. Others do not. That conversation should happen before the borrower assumes they can spend weekends remodeling the kitchen or installing flooring themselves.
I also explained that every contractor would need to go through the lender’s contractor vetting process.
Then I prepared borrowers for another reality of renovation lending.
The contractor’s original bid may change. Additional work items may be identified by the Consultant, appraiser, or underwriter.
That doesn’t necessarily mean anything has gone wrong. It’s simply part of the process.
Years ago, I learned this lesson the hard way.
One borrower became frustrated because additional required repairs had to be added to the renovation scope of work. From the borrower’s perspective, they were making the mortgage payments, so they believed they should be able to decide exactly which improvements would be financed. While I understood their perspective, the loan program had requirements that couldn’t be ignored.
After that experience, I changed the way I introduced renovation loans.
Instead of waiting for required repairs to become an issue, I planted the idea during our very first conversation. I explained that projects sometimes evolve as more information becomes available. Required repairs may be identified during the appraisal, by a Consultant, or during underwriting. If that happened, it didn’t necessarily mean the loan was in jeopardy. It simply meant we were refining the renovation plan before closing.
Once borrowers expected that possibility, those conversations became much easier.
The Importance of Discussing Contingency Reserves
Another topic I never skipped was contingency reserves.
Borrowers appreciated hearing those funds existed and would provide a safety net.
Renovation projects occasionally uncover surprises hidden behind walls, beneath flooring, or inside mechanical systems. Contingency reserves help prepare for those unexpected discoveries without immediately derailing the project.
I always explained how much would be allocated for contingency based on the applicable loan program. What I didn’t do was share that amount with the contractor.
Experience taught me that lesson.
If contractors know exactly how much contingency funding is available, some begin viewing those funds as part of the renovation budget rather than as protection against unforeseen conditions.
Contingency reserves should remain exactly what their name suggests—a reserve for genuine surprises.
I also explained that not every loan program treats unused contingency funds the same way. Some programs permit discretionary use under specific circumstances, while others do not. If contingency funds ultimately weren’t needed, borrowers appreciated knowing in advance how any remaining balance would typically be handled.
Those may seem like small conversations.
They’re not.
They’re expectation-setting conversations.
Set the Timeline Before Borrowers Set Their Own
One of the easiest ways to disappoint borrowers is allowing them to create unrealistic expectations about timing.
Early in my career, I learned it was far better to build reasonable flexibility into the schedule than to promise an aggressive closing date that depended on everything going perfectly.
I typically asked borrowers to allow approximately sixty days for closing.
Did every loan take that long?
No.
In fact, my personal average was significantly shorter.
But renovation lending involves variables that don’t exist with traditional mortgages.
Borrowers need time to select a contractor.
Contractors need time to prepare a bid.
Documents occasionally require revisions.
Building realistic expectations into the timeline gave everyone room to navigate those normal steps without unnecessary stress.
I also emphasized several milestones borrowers needed to remember after closing.
No renovation work should begin before the loan has closed and funded. Required permits should be obtained before work begins. Renovation should begin promptly after closing and continue without lengthy interruptions.
Most importantly, I encouraged borrowers to call before making significant changes.
Thinking about replacing one contractor with another?
Call first.
Considering changing the renovation scope?
Call first.
Those conversations can prevent enormous frustration, unexpected delays, and avoidable complications.
Help Borrowers Understand the Draw Process
Borrowers don’t need to become experts in draw administration.
They do, however, need a basic understanding of why renovation funds aren’t immediately available after closing.
I explained that renovation funds are typically held in a controlled renovation escrow account and released as work progresses according to the requirements of the applicable loan program.
For some borrowers, particularly those whose contractors expect an upfront deposit, that conversation is critical.
If a contractor requires funding immediately after closing and the selected loan program doesn’t permit it, everyone benefits from discovering that before the loan closes—not afterward.
Expectation setting isn’t about overwhelming borrowers with every possible scenario.
It’s about helping them understand the milestones most likely to influence their experience.
Most Renovation Loan Problems Are Preventable
After years of working with renovation loans, I have come to a conclusion: when renovation loans fail, it’s usually because expectations weren’t established early enough.
Borrowers hire a contractor without understanding the contractor vetting process.
Someone begins work before closing.
The renovation scope changes without discussing it with the lender.
Permits are overlooked because everyone assumed someone else was handling them.
Most of those situations are preventable. They aren’t guideline problems. They’re communication problems.
That’s why the first conversation matters so much.
Confidence Is Built One Conversation at a Time
Before ending my initial conversations with borrowers, I often asked myself one simple question.
When this borrower hangs up the phone, will they feel more confused—or more confident?
That’s really the measure of success.
Borrowers don’t expect loan officers to memorize every guideline or answer every question immediately.
They expect someone who can guide them confidently through an unfamiliar process.
That’s where trust is built. It’s where uncertainty begins giving way to confidence. And it’s where successful renovation loans truly begin.
The best renovation loan officers aren’t necessarily the ones who remember the most guidelines. They’re the ones who eliminate the most surprises.
When borrowers know what to expect, contractors know what to expect, and referral partners know what to expect, everyone begins moving in the same direction. The process becomes clearer. Communication improves. Unexpected obstacles become easier to navigate. And renovation loans move forward the way they were always intended to—through thoughtful planning, clear expectations, and confident guidance.
Continue Your Renovation Lending Education
Setting expectations with borrowers is only one part of creating a successful renovation lending experience.
Continue expanding your knowledge by exploring additional articles on this website covering topics like the renovation loan process and contractor vetting. You can also continue learning by listening to the renovatED for Lenders podcast, where practical strategies, operational best practices, and real-world insights help mortgage professionals build, improve, and scale successful renovation lending platforms.
About Jennifer Goldsby
Jennifer Goldsby is the founder of The Reno Gal® and the host of the renovatED for Lenders podcast. With more than two decades of renovation lending experience, she helps mortgage lenders build, improve, and scale successful renovation lending platforms through practical education, consulting, and real-world operational guidance.