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Let's Talk About Renovation Loans!


Unless you have been living under a rock, you know how competitive the real estate market is right now. Move in ready homes are at a premium, because demand outpaces supply. So, with that in mind, I want to introduce you to a different way to get what you want...renovation loans.


If you are buying a home, you know the whole process itself is pretty expensive. And with money as cheap as it is, maybe you haven't been looking at "fixer uppers" because you don't have the skill, or cash, to make it what you want. No worries there, that's where a renovation loan comes in to play.


Renovation loans are purchase mortgages, just like your standard loan, but they value the property from an appraisal standpoint after your renovation is done. So, what the home is worth now is important, but they are looking at what it will be worth, after! Also, they allocate funds for your renovation at closing, in an escrow account. As your contractor gets jobs checked off the list, funds are released to him or her and the project keeps rolling. I used one about 10 years ago to renovate our home in Howell. It was a fantastic decision and got us into a home we could have not otherwise navigated.


Your two basic type of renovation loans you will see offered are FHA 203k loans, and conventional Fannie Mae HomeStyle Loans.


FHA loans can tend to be a little more difficult than conventional loans, and 203k loans are no different here. Expect to fill out some additional paperwork and the property may be subject to a FHA appraisal (which is a little more stringent), but borrowers can borrow up to 110% of the projected value, and the down payment is a little less.

Read more about it from HUDs website here.


Homestyle loans are usually require a minimum of 5% down, but can have some advantages like easier close, and slightly cheaper rate. The repairs on a HomeStyle Loan can not exceed 75% of the homes completed value, so keep that in mind, but most buyers are using these to renovate, not completely rebuild and blow out.

Read more about Fannie Mae Homestyle Loans here.


Now, more than ever, loans like these are super important, because if you can't find the house you're looking for, you might just have to create it!


Until next week,


Chris & Nikki

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