Renovation Loans 101: What’s Covered?
Did you know that there are specific loans designed to help you purchase a fixer-upper or pay to revamp your new home? Renovation loans are an amazing way to make your new house into your dream home and pay for upgrades.
What renovation loans could you have access to?
A wide range of things are covered by a renovation loan, and you might be surprised how much you can use the money for! What’s typically covered?
- Energy efficiency improvements (solar panels, insulation, sealing, Energy Star-rated appliances, etc.)
- Major landscaping improvements, including native plants
- Modernizing plumbing, electric and/or HVAC systems
- Foundation repairs
- Structural changes or additions
- Adding a second story
- Interior and/or exterior painting
- Replacing windows
- Exterior siding
- Updating kitchens and/or bathrooms
In most cases, renovation loans will give you 6 months to complete renovations and remodeling from when you take ownership of the home.
FHA 203k Renovation Loans
These FHA-insured renovation loans are designed for only owner-occupied homes. You must make a minimum down payment of at least 3.5%. This loan has a lower credit score requirement than the HomeStyle loan, and you can get a limited or standard FHA 203k loan.
If you use this loan type, you need to get a loan consultant to guide you through the process. This is actually a huge advantage because your 203k consultant will effectively act as your project manager to assess costs, oversee work and make sure everything is on track.
Fannie Mae’s HomeStyle Loan
This is one of the most familiar renovation loans on the market today. The HomeStyle loan lets you to purchase a home that needs repairs or refinance an existing home loan to pay for home improvements.
Any Fannie Mar-approved lender can extend a HomeStyle loan, but the requirements are more rigorous:
- A credit score of 620 or higher
- A down payment that is 5% of the purchase price of the home
- A certified contractor needs to prepare and submit a detailed cost estimate covering all of the work that will be done on the home
Partner with Equity Mortgage for a Renovation Loan
We are experienced in getting homeowners the best possible mortgage product for their situation, whether you just bought a fixer-upper or need to put work into your current home.
Since every client is in a different situation, we encourage you to get in touch and learn how we can help. Contact us today by calling 443-471-4310. We look forward to hearing from you!