Best Home Loans for Buying Fixer Uppers

While fixer-uppers require a bit more work, there’s something so exciting about them. To know you can create something new and customizable to you is both refreshing and rewarding. It gives you an opportunity to bring your visions to life, and create a foundation for the rest of the house’s projects. 

But fixer-uppers are no simple task, and the cost can get hefty. Most traditional mortgages won’t allow you to finance the cost of significant repairs and renovations when buying a home. Unfortunately, this means you’re having to pay the down payment, closing costs , AND renovations. Luckily, there are a few alternative options for loans that may help. In this article, we’ll take a deep dive into each of those loans, and how they might suit your needs. 

Both Fannie Mae and Freddie Mac provide loan programs that cater to homebuyers who are looking to purchase and renovate a home at the same time. These enterprises buy  mortgages from other lenders, versus lending money directly to customers.  

The Fannie Mae Homestyle Renovation Mortgage gives people the opportunity to purchase a home and renovations within the same mortgage. This eliminates the need to seek out a secondary loan. These types of loans are available for 15-30 year fixed mortgage rates, and some adjustable-rate mortgage terms. 

If you’re looking to finance renovation costs, borrowers can also opt into Fannie’s Community Seconds mortgage in addition to the Homestyle loan. By combining these two, you can finance up to 105% of the home’s purchase price. Community Seconds funds come from states, local governments, federal agencies.

Freddie Mac’s program is similar to Fannie Mae’s because it caters to those who are looking to renovate, repair, or restore. However, their renovations loans are available for fixed-rate mortgages with 15, 20, and 30 year terms (and most types of adjustable-rate mortgages). Borrowers have to pay a minimum down payment of 5% for a single family home, 15% for a two-unit home, and 20% for three-four unit homes. 

Click here to learn how credit scores affect both the Fannie Mae and Freddie Mac loans.

FHA 203(k) loans provide a single, long-term, fixed or adjustable-rate mortgage that covers home purchase and rehabilitation. Lenders are more willing to provide loans because these mortgages are federally insured. Home buyers have to provide a detailed list of costs to back up their loan. There are two types of 203(k) loans: limited and standard. A limited 203(k) loan is built for smaller rehab jobs that cost $35,000 or less. A standard loan is meant for more costly renovations.

There are a few other options if you don’t want to combine the house price and renovation payments into one loan. 

You could apply for an unsecured personal loan , which means the financing wouldn’t be backed by your home. Loan amounts typically range from $1,000 to $50,000. Just note that interest rates will be higher, and credit score affects this amount as well. 

Another option is an unsecured personal line of credit . This works similarly to a credit card in that once you’re approved, you’re given a credit line of a certain amount and only pay back the amount you borrow, plus interest. Once the balance is paid back, you can reuse that available credit.

Personal lines of credit often range from $1,000 to $100,000 and have terms that usually last as long as five years. Average rates range from about 9-18%, depending on your creditworthiness.

Need help figuring out your mortgage options? Ken Venick has your back! We have over 30 years of experience, and can find solutions that best fit your needs, whether you’re a first time home buyer or a veteran to the game. Visit our services page for more info and contact us today. 

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