Your home is an investment. Home remodel and renovation loans can give you the money you need to strengthen that investment with repairs and updates. When it comes to home improvements, you may need an emergency repair. You could also simply want to redo your bathroom for aesthetic purposes.
Depending on your needs and goals, Renovate or Emergency Repairs, can have a significant baring on the ideal loan type you may want to apply for, when you don’t necessarily have or want to spend your savings to accomplish. When it comes to emergency renovations, you’ll want to get it done right away. Imagine trying to save up $10,000 to replace the roof while your roof has been leaking for months or years. You’ll want to get a loan as soon as possible rather than paying more money for the water damage.
On the other hand, if you’re looking to spruce up your balcony, a loan is also a perfect option in case things come up a little more expensive than you anticipated. Still not sure, though?
Don’t Hate – Renovate!
Making necessary modifications to a home to keep it habitable and comfortable is way more affordable than relocating, even if it includes getting a loan. As a homeowner, you don’t have to wait years to save up for a remodel. Borrowing money in a well-educated manner can help you achieve your renovation dreams (or needs), and not break the bank.
The appeal of a renovation loan is that it links two loans – a rehab loan and a home loan – effortlessly. Regardless of the purpose, when you need to apply for a loan for any home remodel or repair work, you want to know what your choices are.
How Renovation Loans Work for a Home Remodel
It all depends on whether you’re a home buyer or homeowner. If you are a homeowner, this sort of loan lets you refinance your home, so you have the money to remodel and pay off your existing mortgage. As a home buyer, this loan lets you buy a house and get additional funding for a remodeling. There are several renovation loans, all based on your particular needs. Read on for our top five renovation loans and why applying for one will make your life more comfortable in the long run.
Fannie Mae’s Home-style Loan
For home buyers, this rehab loan allows you to purchase a house with a budget for rehabilitation and repairs. If you are a homeowner, this loan lets you refinance your mortgage so you can remodel your house. Fannie Mae’s Homestyle loan is an attractive choice since it allows everything to be in one payment, which makes it simpler for the home buyer or homeowner.
FHA 203k Loans
You can get an FHA 203k loan from the Federal Housing Authority. These usually have a lower down payment and credit score requirements. The reason? Typically, when applying for this kind of loan, you’ll be remodeling a property that many lenders won’t want a hand in. Also, this loan lends you money not only for the repairs but also to purchase the home if necessary.
Let’s say you’re converting an uninhabitable building on a great property. You can apply for this loan to purchase the property and flip it into the home you would want to live in. Because a federal authority backs it, you don’t need perfect credit either. One of the catches, however, is that all renovations must be completed within a six-month window.
VA Renovation Loans
For qualifying Veterans, there are few loans that have as many advantages as this loan for renovations. This program will allow for a borrower to buy a home and get the funding for renovations with 0% down. Additionally, a Vet may also use the loan to refinance a home they presently own. Like the FHA loan, this loan is more forgiving about the credit scores it requires.
Jumbo Rehab Loan
This loan offers money for home remodels or necessary repairs such as:
• Kitchens
• Pools
• Attics
• Bathrooms
• Basements
Know that you can’t use a jumbo renovation loan for structural or foundation problems, however. Typically, the maximum amount of a jumbo renovation loan is around 30% of the total renovation value.
The Jumbo loan is also an excellent choice for someone who may have an emergency repair or something that needs to be taken care of immediately.
Cash-Out Refinance
For the Cash-Out loan, you refinance your entire home mortgage. The amount you refinance for is higher than the original loan. Therefore, you will get that difference in cash. However, you must be smart with a credit like this because whatever money you take out of your mortgage, you’ll still have to pay back with interest.
For example, say you own a home worth $100,000, and you’ve already paid $50,000 off that you now own at equity. If you’re doing a renovation that costs $25,000, you’ll essentially be putting that back into what you owe on your home in exchange for cash. Ultimately, with a loan like this, it’s essential to be smart.
Other Renovation Funding Options
For some homeowners, getting a HELOC (home equity line of credit), is a very popular option. It’s a loan with an equity line of credit that has a revolving balance. A HELOC loan requires you to be especially on top of your finances, as it’s easy to slip too far down the line of credit if you’re not careful. We find that a HELOC can be an excellent resource for Emergency Funds, when the owner doesn’t have a lot of savings. If you have a HELOC and a major water leak occurs, you have the piece of mind in knowing that you can get money fast to pay for a repair and not wait for a mortgage application to go through.
How to Pick the Best Renovation Loan
The best way to understand which loan type is correct for you is to partner with one of our knowledgeable mortgage lenders. We will look over everything and guide you through the whole process. Contact us at Strategic Mortgage today for help to get started on your home remodel project!
