Loans for Home Renovation
Home renovations come in all shapes and sizes. Fortunately, loans for home renovation do as well. Understanding the methods available to finance potential renovations expands your options when you’re shopping for a home. It can help you make the most of your budget by allowing you to secure a home that’s larger or in a better location. Of course, knowing the ins and outs of home renovation loans is also valuable when you’re working to improve the home that you already own. There are actually several different home renovation loan products available.
The Fannie Mae HomeStyle Renovation Mortgage
A Fannie Mae HomeStyle Renovation Mortgage is an all-in-one purchase and renovation loan. As Forbes reports, borrowers get one home loan that’s based on the improved value of the property, so they’re able to obtain funds to either purchase a property or pay off an existing mortgage and finance the approved renovations in a single loan product. That means there’s only one closing and one monthly loan payment to deal with. You can use this loan to purchase a primary residence, a second home, or an investment property. As for renovations, you can fund almost any type of improvement as long as it’s permanently attached to the property and doesn’t involve tearing the property down and starting from scratch.
The FHA 203(k) Rehabilitation Loan
What can you do with an FHA 203(k) Rehabilitation Loan? For starters, you’ll be able to bundle the cost of a home purchase and renovation into a single loan. According to MPA, it’s a great choice for low- and middle-income buyers who are interested in improving a primary residence. However, it’s important to remember that this loan isn’t for DIY fans. The work must be completed by an FHA-approved contractor. In addition, not all improvements and major structural repairs will be allowed, so you’ll want to look carefully at what is and isn’t likely to make the cut before you fall in love with a fixer-upper if you’re determined to use this form of financing.
The Cash-Out Refinance Loan
A cash-out refinance loan isn’t an option if you’re still shopping for your dream home. However, it may be a perfect choice if you’re a homeowner who has sufficient equity. As The Mortgage Reports explains, a cash-out refinance involves replacing your existing home loan with a new one that trades your current home equity for cash. Then, you can take that cash and use it for whatever you want, including home renovations. While this means you’ll be starting over with a new mortgage, it can be a good move if you can secure a lower interest rate. Plus, many homeowners like the fact that they’ll continue to only have one monthly loan payment.
PrimeLending’s Buyer/Seller Funded Repair Escrow Program
What happens when you have a property that requires renovations and a need for a speedy sale? You may be an ideal candidate for PrimeLending’s Buyer/Seller Funded Repair Escrow Program. With this program, a seller can fund an escrow account so that the buyer can have any needed repairs or renovations completed. Here’s how it works:
- The renovation team will review proposed repairs to determine eligibility.
- All improvements must add value and attach to the property.
- The maximum time allowed for completion of repairs is 30 days.
- Completion of the work and eligibility to perform it is subject to approval. Borrowers, their family members, their employers, sellers, Realtors, and any interested parties are not eligible to complete the work.
- A contingency reserve of 10 percent of the repair amount is required for all loan transactions.
- Conventional and FHA loan programs are eligible with either buyer or seller funding.
- USDA and VA loan programs are eligible with seller funding only.
When you’re ready to find the ideal home renovation loan for your needs, reach out to PrimeLending Dallas. Our loan experts would be delighted to help you. We also encourage you to check out our blog post How Does a Renovation Loan Work?