Renovation Loan 101
Is the home you’re in love with a fixer-upper? Renovation loans are the best way to turn a home that needs a little TLC into the home of your dreams. Since lenders won’t give you a $300,000 loan for a home that is only worth $225,000, it can take some creativity to bridge that gap. By obtaining a HomeStyle renovation loan or 203(k) mortgage, you can afford to make repairs and finance your new home.
Renovation loans help interested homebuyers purchase a home and make immediate home improvements. By adding the purchase price of the home and the costs of renovating it into a single mortgage to represent the post-improvement value of the house, homeowners can fix up a home without having multiple loans out at once.
What Home Improvements Are Covered?
Depending on the exact renovation loan that you obtain, a wide range of home improvements are covered. What can renovation loans be used to pay for?
- Energy efficiency improvements, like installing solar panels or adding insulation
- New appliances
- Major landscaping, including the installation of native plants
- Updating and upgrading electrical, plumbing and HVAC systems
- Roof replacement
- Structural additions, like a garage or adding a second story
- Foundation repair
- Remodeling kitchens and bathrooms
- Window and door replacement
- Miscellaneous repairs
- Inspection fees, architectural fees and permits
When using a renovation loan, you typically have a window of 6 months to complete all of the necessary improvements after taking ownership of the home.
Renovation Loan Options
- FHA 203(k) Renovation Loans: These loans can be used for owner-occupied homes and can be 30-year fixed rate mortgages or 5/1 adjustable-rate mortgages. These loans can’t be used to add window treatments, swimming pools, used appliances or any luxury items.
- HomeStyle Renovation Loans: These are fixed-rate loans that can be used for either owner-occupied homes, second homes or investment properties. You can get a loan for up to 50% of the purchase price and any repairs, renovations, remodeling projects or energy efficiency improvements are covered as long as everything is something permanent that adds home value.
Understand Your Renovation Loan Options with Equity Mortgage
I am experienced in getting homeowners the best possible mortgage product for their situation. Since every client is in a different situation, I encourage you to get in touch and learn how I can help. Contact us today by calling 443-471-4310. I look forward to hearing from you!