As winter’s storms come to an end, it’s time to give your dwelling space some love. Here’s how you can use a rehab loan to create your dream home.
Choose a Renovation Project
No doubt, making repairs to a house can pay off when it’s time to say goodbye to your home. Of course, the rate-of-return you’ll reap at sales time depends on the type of renovation project. For example, a bathroom remodel is far more likely to increase your home’s overall value than, say, a swimming pool.
Interestingly, you don’t need a colossal renovation budget to improve your home’s market value. Indeed, Remodeling magazine notes that minor kitchen renovations, garage door replacements, and vinyl window upgrades carry a significant return-on-investment.
Renovation project costs can quickly exceed the monetary value that the upgrades add to your home. Researching the typical return-on-investment for your type of project before making design decisions helps prevent a budget disaster. Don’t hesitate to reach out to a Eugene-based real estate expert for advice on how you can attract buyers through intelligent renovations.
Examine Your Finances
Are you obsessed with the home renovation shows that dominate cable television? If so, you might underestimate the cost of a high-quality home improvement project. Unlike the renovation projects that go from design-to-completion in thirty minutes, a real-life project takes time and considerable cash.
Once you settle on the scope of a project that suits your needs, you’ll need to take a hard look at your finances. Home renovations tend to cost more than the initial budget. It’s not uncommon, for example, to discover that your decades-old bathroom requires a new subfloor and mold remediation before you can give it a spa-like transformation.
Examine your budget to understand exactly how much money you can afford to spend improving your home. Taking the time to clean up your finances before you tackle a home remodel helps ensure that you can comfortably cover any surprises.
Fortunately, you don’t need to empty your bank account to pay for your home renovation. A rehab loan makes it doable to turn a ho-hum house into your dream home.
Rely on a Rehab Loan
You can rely on a home mortgage expert to match you with the rehab loan that meets your needs. One of the most common avenues to fund a home renovation is through an FHA 203(k) loan. A major perk of this loan is that it rolls the mortgage and the renovation into one monthly payment.
Qualify for the FHA 203(k) Loan
As with any loan, the lender will require you to meet specific qualifications. FHA loans, backed by the federal government, are open to a wide variety of borrowers.
Minimum qualifications for an FHA 203(k) loan include:
- A 3.5% down payment
- A credit score of at least 500
- No foreclosures within the last three years
- The total loan amount stays within the maximum allowable
An FHA 203(k) loan cannot exceed the loan maximum set for your area. In Eugene, for instance, the 2021 FHA maximum loan amount is $356,362.
Ways to Use the FHA 203(k) Rehab Loan
Keep in mind that you can’t use an FHA rehab loan for every renovation project. While the loan funds a vast array of upgrades, it won’t, for instance, pay for that backyard basketball court that your kids desire. Examples of how you can use this kind of rehab loan include:
- Accessibility upgrades
- Fixing safety issues
- Replacing and repairing the roof or gutter
- Installing energy-efficient appliances
The FHA requires that you hire a professional contractor to perform the repairs. Your project will stay stress-free on the money-side if you hire a first-rate contractor who knows how to keep the project within the confines of an FHA rehab loan.
Other Rehab Loans
Since there are limits to how you can use an FHA renovation loan, you might prefer another rehab loan. The Fannie Mae HomestyleⓇ, for example, does not limit the scope of your renovation projects. Again, do your research and depend on your home loan specialist to choose the right loan.
Lastly, why not make 2022 the year that you complete a home renovation? With so many financing options available, a rehab loan will fit your budget and renovation goals.
The home loan specialists at Strategic Mortgage Solutions look forward to showing you how a rehab loan can make your Eugene, OR, dream home a reality. Contact us for a refreshingly honest and friendly home-financing discussion.