More often than not, moving into your first home or a new home all together will require some work to make it truly yours. Renovations are just part of home ownership, and with some clever planning can be part of your home financing package as well. Instead of waiting until years down the road or using hard earned savings to tackle your initial renovation project, consider taking out the money up front.
Renovation loans come in many shapes and colors, but today we’ll tackle what exactly a renovation loan entails and how they work.
What is a Renovation Loan?
A renovation loan gives homeowners the funds to make necessary or desirable renovations to a home or access to the credit to make those changes. Renovation loans come in a variety of packages including simple personal loans or government-sponsored loans to get the job done. Whatever route you take, you lender can help you find a way to roll your loan into one package eliminating the need to pay two separate debts.
How do Renovation Loans Work?
Depending on your credit, location, scope of work, and where you are in your mortgage proceedings, there will be different options available to you. We’ve already alluded to some options for home renovation loans, but they can take many forms and can be made to work in your favor in many different ways.
For Good Credit – Fannie Mae HomeStyle:
The Fannie Mae HomeStyle loan allows you to structure your mortgage in either a 15 or 30-year package and lets you include the renovations you plan on doing in the total loan. The HomeStyle loan amount is dependent on the value of the home after the renovations are completed and requires great credit. If that jives with you needs, then consider this option.
For Not-So-Good Credit – FHA 203(k)
The FHA 203(k) is the likely answer to most borrowers. 203(k) loan packages can be either Full Loan options or Streamline options where a lump sum is lended up front for major repairs or a smaller amount is lended to cover more minor repairs, respectively. Go this route if your credit isn’t perfect and you don’t mind paying some additional up front fees in the principal.
For Everyone Else – EZ “C”onventional
EZ “C”onventional loans can roll pre-planned value-adding renovations into the original loan and structure it just like a conventional loan. This loan type can cover appraiser-required or borrower-desired renovations as long as they add value to home over time.
Should You Go With A Renovation Loan?
There are many types of renovation loans, and if you’re looking to make significant repairs, then there is a solution that’s right for you. Bear in mind that if you’re on a budget, renovation loans will add to your monthly mortgage payment with the added principal. Depending on your long term plans, a renovation loan may be exactly what you need for your dream fixer-upper.
With so many options out there, it’s best to get in touch with a loan officer from Tidewater Mortgage Services who has the experience and the knowledge to help you find the best option for you, your family, and your future plans. As a matter of fact, getting pre-qualified is as simple as filling out our online application. Get started today and get your DIY on!