The prospect of renovating a home can be both exhilarating and intimidating. After all, renovations offer a chance to customize your home, but they also bring several daunting challenges, including the task of figuring out how to pay for them. Fortunately, you have options. Whether you are looking to simultaneously purchase and renovate a property or to update your existing property, our team would be happy to help you sort through the available home renovation loan options to select the best choice for your situation.
Home Renovation Loan Options
Remodeling, repairing, or renovating a property may bring headaches, but it can also result in a satisfying payoff. When done right, this work can improve a home’s appearance, livability, functionality, and value. According to the National Association of Realtors, after the work is complete, 75 percent of homeowners experience a greater desire to spend time in their home. A similar percentage report reveling in a major sense of accomplishment when their thoughts turn to the finished project. Clearly, renovations can be worth the investment if you can figure out how to fund them. What home renovation loan options should you consider?
The Fannie Mae HomeStyle Renovation Loan Program
Would you like to secure the funds needed for both the purchase of a new home and your renovation plans in a single loan? It’s possible with a Fannie Mae HomeStyle Renovation Loan. A “one-time-close” home renovation loan, it gives you a chance to forgo securing a construction loan or second mortgage by letting you do it all with one loan and one monthly mortgage payment. Plus, you get a mortgage that’s based on the property’s expected improved value instead of its current value. How does a HomeStyle Renovation Loan work?
- The loan can be utilized in the purchase of a primary residence, a second home, or an investment property.
- A down payment of just 5 percent is required.
- Renovation funds can be used for permanent renovations or repairs that add value.
- Renovation funding can equal up to 75 percent of the property’s expected value once the improvements are finished.
- After closing, renovation funds are put into an interest-bearing custodial account. They are disbursed as projects are completed. Any extra funds are put towards the mortgage balance once the work is done.
The FHA 203k Renovation Loan Program
If you’d like to buy a new home or refinance your current one while simultaneously borrowing funds for renovations, then you’ll want to take a look at the Federal Housing Administration’s 203k Renovation Loans. This loan product is another “one-time-close” home renovation loan that allows you to borrow based on a property’s expected improved value. However, this type of financing is only available for use on a property that will be your primary residence. What do you need to know about a 203k Renovation Loan?
- The down payment can be as low as 3.5 percent.
- Renovations can include major projects like roof replacement, foundation repair, kitchen and bathroom remodels, mold remediation, and central heating and air system work. While luxury renovations are not permitted, optional renovations are allowed.
- The loan amount can total up to 110 percent of the property’s improved value.
- Closing can occur before renovation starts.
- The seller can pay up to 6 percent of closing costs.
- After closing, renovation funds are put in an escrow account and disbursed as the work is completed.
PrimeLending’s Buyer/Seller Funded Repair Escrow Program
What if the home that you hope to buy needs repairs, but the seller lacks the time or resources to tackle them before your purchase? PrimeLending’s Buyer/Seller Funded Repair Escrow Program might be the solution. How does this renovation loan option work?
- The seller funds an escrow account, which the buyer uses to finance the renovations. Up to 10 percent of the improved value can be set aside for this purpose.
- A contingency reserve that is equal to at least 10 percent of the repair amount is also required.
- Planned renovations will be evaluated by a renovation team to confirm their eligibility. Any improvement must attach to the property and add to its value.
- Renovations and repairs must be completed within 30 days. The work cannot be performed by the buyer, their family, their employer, their realtor, or any other interested party.
PrimeLending’s Jumbo Renovation Financing Program
What if your mortgage exceeds the boundaries of conventional loans? PrimeLending’s Jumbo Renovation Loan Program might be a good fit. What should prospective borrowers know about this form of financing?
- This is a 30-year, fixed rate loan.
- The maximum allowance for renovation is the lesser of 30 percent of the property’s improved value or $250,000.
- All renovations must be permanently attached and add to the value of the property. This can include repairs and renovations to kitchens, bathrooms, swimming pools, and outdoor living spaces.
Are you eager to explore the full range of our home renovation loan options? We can help. With our expertise and commitment to clear and timely communication, we can guide you through the home loan process, from application to closing. To learn more about getting preapproved or how to make an offer on a home, please call PrimeLending of Springfield, Missouri, at 417-616-0777 or contact us online.