HOW DO RENOVATION LOANS WORK?
Unlocking a Home’s Potential
When shopping for a home, you may come across properties that aren’t quite what you are looking for but are oozing with potential.
Renovation loans enable the homebuyer to roll the costs of repairs and renovations into a single loan. This can greatly increase a prospective homebuyer’s housing options, streamline the renovation process, and save money overall.
Borrow against the home’s subject-to-completion value, not its current condition
HomeStyle Renovation Loan
Limited 203(k) Rehabilitation Mortgage
Standard 203(k) Rehabilitation Mortgage
Renovation Loan Options Also Include:
HomeStyle Renovation Loans
You can use a Fannie Mae HomeStyle Renovation loan to finance just about any type of upgrades on a primary residence, a second home or an investment property. This even includes some“luxury” items like a brand new in-ground swimming pool. There are no required improvements or restrictions on the types of repairs allowed, nor is there a minimum dollar amount for the repairs. However, repairs or improvements must be permanently affixed to the real property and be completed by a licensed contractor, according to the FannieMae HomeStyle renovation loan guidelines.
Limited 203(k) Rehabilitation Mortgage
In addition to financing the purchase of your new home, an FHA Limited 203(k) can provide up to $35,000 in additional funds for alterations to your new or existing home. Keep in mind that the scope of repairs is limited to minor, cosmetic, non-structural items, such as updating a kitchen or bathroom with new flooring or cabinets, or for purchasing new appliances.
Standard 203(k) Rehabilitation Mortgage
If the home you are considering needs more than $35,000 in repairs and improvements, or if the repairs needed are structural in nature, the StandardFHA 203(k) might be the right solution. The Standard FHA 203(k) option is ideal for more intensive home remodels and can provide additional funds*** to help with eligible repairs, including adding additional square footage.
FAQs About Renovation Loans
Are renovation mortgage loans a good idea?
Answer:
If the home you are living in or the home you are looking at for purchase needs repairs, or if you simply have a wish-list of upgrades that you would like to make, a renovation mortgage might be right for you. Keep in mind that since renovation costs are being financed into your home loan along with the mortgage amount, this could result in a higher monthly mortgage payment than other mortgage loan options.
At Fairway, your renovation loan will take the form of a fixed-rate mortgage, which protects you from rising interest rates in the future. Remember, though, that renovation mortgage programs will differ in terms of their down-payment requirements and types of eligible repairs, so speak with your Fairway mortgage advisor about all your options today!
Can you use a VA home loan for renovations?
Answer:
If you are active-duty military, an eligible veteran or a surviving spouse, Fairway has a VA renovation loan option available. An advantage of the VA renovation loan is that eligible borrowers may be able to borrow up to 100% of the future home value*, along with an additional $35,000 in alterations to make minor, cosmetic, non-structural improvements. There are also Conventional renovation loan programs and FHA renovation loan programs out there, for those who are not eligible for a VA home mortgage loan.
If you are not eligible for a VA loan, you may still be able to finance 100% of the purchase and necessary renovation costs with a USDA renovation loan**. Ask your Fairway mortgage advisor what you qualify for today!
Is a Renovation Loan Right for You?
Renovation loans can broaden one’s options when searching for a new home, and in the end, can make it more affordable to have the home you really want.
But as with any loan, there are a number of factors to consider. Make sure you reach out to Leslie and the Kight Team to find out what works best for your situation.
Invest in the Future You Deserve.
Not only do you deserve a home you love, but one that will
lead to a better future. We can help you get there.
*A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits.
**USDA Guaranteed Rural Housing loans subject to USDA-specific requirements and applicable state income and property limits.
*** Final disbursement of funds is subject to final inspection.