Sometimes a simple abode just needs some capital and construction work to transform into a dream home. So instead of passing up on a house that needs some help, consider applying for a home renovation loan. The extra funding provided by the loan will allow you to make improvements on the house as soon as you close on it. Or, you could use a home renovation loan to upgrade your current residence. Versatile and valuable, home renovation loans can help you reach a more secure financial position so that you can make home improvements right away while rolling upgrade costs into your mortgage.
Home Renovation Loans
Home renovation loans offer an affordable way for homeowners to borrow money for upgrades or improvements. They can save you time and money, since you will have just one outstanding debt for the cost of your home and the changes that you want to make to it.
To obtain a home renovation loan, you will need to make a low down payment that can vary based on the type of loan. The total loan amount will be based on the appraised value of your home after the improvements. Depending on the amount of the down payment and your home’s value, you could qualify for a loan that allows you to accomplish one or more of the following renovations:
- Kitchen upgrade
- Bathroom upgrade
- Electrical system update
- Heating system update
- Plumbing system update
- Installation of new flooring
- Replacement of necessary housing elements (roof, windows, siding)
- Upgrades to customize your residence to your preferences
Upon making any of these home improvements, you may increase the value of your residence. During the years you live in your home, you will be able to appreciate its enhanced comfort, energy efficiency, and security. In addition, your renovations will prove beneficial when you decide to sell your home.
Types of Renovation Loans
FHA 203k Renovation Loans
You can use the FHA 203k Renovation Loan program to remodel, repair, or upgrade your residence. You could refinance your current home with the loan or use it to buy a new home that requires repairs. If you take advantage of this program, you won’t need a separate loan to cover repairs or renovation costs. Instead, you will have just one convenient home loan and one simple monthly payment.
FHA 203k Renovation Loans can cover a wide range of repairs, from minor upgrades to major repairs, like foundations and roofs. Eligible repairs and renovations include the following:
- Roof repairs (or full replacement)
- Foundation repairs
- Kitchen remodels
- Bathroom upgrades
- Interior or exterior paint
- Mold remediation or repairs
- Installation of heating and cooling systems
- Landscaping modifications and upgrades
- Energy efficient upgrades
- Installation of built-in appliances
You can close on the loan before beginning any repairs or renovations, and the loan amount can reach up to 110% of the home’s value after improvements. In addition, under this type of renovation loan, the seller can contribute as much as 6% toward the home’s closing costs as a part of the purchase deal. To qualify, you will need a minimum down payment of 3.5%.
HomeStyle® Renovation Loans
HomeStyle® loans¹ offer all the basic benefits of home renovation loans. They can improve your home’s value at an affordable price, saving you time and money in the long run, and they are available for primary homes, secondary homes, and investment properties. With HomeStyle® loans flexible options and streamlined documentation process, you won’t feel burdened by barriers and limitations. Although you do need to keep some restrictions in mind, you can ensure compliance by consulting a reliable lender. For example, you must keep your renovation costs at 50% or less of the “as-completed” appraised value of the home.
Our Buyer/Seller Funded Repair Escrow Program
Sometimes a home requires renovations to sell. If you lack the time or money to complete needed repairs or renovations but you wish to sell your home quickly, consider using PrimeLending’s Buyer/Seller Funded Repair Escrow Program. Using this program, you (the seller) can finance a repair or renovation escrow account so that your home’s buyer can complete the repairs/renovations. You can use an FHA or conventional loan for this escrow program, and USDA and VA loans are eligible if funded by the seller. A minimum contingency reserve of 10 percent is required for every loan transaction.
The improvements made must connect to the property and add value to qualify. So before the buyer begins making repairs or renovations, a team of experts will assess your plans to determine program eligibility. In addition, the repairs and renovations must be completed within 30 days, and they cannot be completed by the following parties: the seller, the borrower, the borrower’s employer, family members, the real estate agent, and any other party with an interest in the transaction.
Renovation Financing for Jumbo Loans
What if you want to both go big and go home? To finance a jumbo renovation, you can obtain a 30-year, fixed-rate loan. Adjustable rates are not available for this type of renovation loan. Like an escrow loan, the repair must be permanently connected to the property and add value to it. For more information about renovation financing for jumbo loans, consult a lender with experience in jumbo renovation loans.
Choosing the Best Financing Option
If you’re ready to buy and/or renovate a house and you live in the Kansas City area, contact PrimeLending today. At our branches located throughout Kansas City, we can help you explore our wide variety of home renovation loans and programs. Plus, PrimeLending utilizes delegated underwriting, local appraisers, and cutting-edge technology to accelerate the underwriting and closing processes. When you’re ready to learn more, please give us a call at 844-701-5626.
¹Homestyle* is a registered trademark of Fannie Mae.