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How do Renovation Loans work?

Renovation Loans are mortgages that bundle repairs or upgrade costs into the loan itself. It gives qualified home buyers more opportunities in a hot housing market when great homes that are available are harder to come across. They can find a home in need of updating at a lower price point and include the cost of repairs into the loan.

What are the benefits of Renovation Loans?

Renovation loans are great for qualified home buyers that are looking for anything from a full fixer-upper to a home that needs just a few upgrades. Home buyers can take advantage of a home at a lower price that needs some updating, expanding, or some minimal improvements and have the financial room to make it what they want.

Can I Refinance my Mortgage With a Renovation Loan?

Renovation loans can be refinanced and there are a few options that can suit a home owner’s needs including an FHA 203(k) Streamline Refinance loan. Qualified home owners have options available to them for refinancing and renovating their home. Contact a local On Q Mortgage Consultant to learn more about refinancing with a home renovation loan.

What Types of Home Renovation Loans are There?

On Q Financial has an assortment of home loan renovation options to fit almost every repair or upgrade. From small repairs, repainting, and even larger upgrades including the addition of an extra room, we have options that will allow qualified home buyers to make their house into their dream home!
Some of those options include fixing or upgrading features such as:

  • Eliminating health and safety hazards
  • Repairing/replacing plumbing, heating, AC and electrical systems
  • Making changes for improved functions and modernization
  • Making energy conservation improvements
  • Creating accessibility for persons with disabilities
  • Installing or repairing fences, walkways, and driveways
  • Installing a new refrigerator, cooktop, oven, dishwasher, built-in microwave oven and washer/dryer
  • Repairing or removing an in-ground swimming pool
  • Installing smoke detectors
  • Installing, replacing or repairing exterior decks, patios, and porches
  • And More!

Eligibility for these renovations is determined by the type of renovation loan a home qualifies for. Contact a local Mortgage Consultant to learn about the eligibility requirements for certain homes.

The FHA 203k Loan

All too often buyers find a home they love, in the perfect neighborhood, but feel overwhelmed with the amount of repairs or remodeling necessary.

An FHA 203k loan offers a solution to that problem by simply rolling the cost of those home improvements into your loan transaction.

Once you’ve had an evaluation done and estimated the cost of any required repairs, our mortgage professionals can factor that into the total loan amount. We factor in estimated repair costs and any additional renovations, to remove the need for a hefty renovation budget.

FHA 203k Loan Rates

There are two different types of FHA 203k loans, Standard and Limited, and both loan programs are a 30-year fixed-rate mortgage.

Standard FHA 203k Loans

Standard 203k loans are for homes that need structural repairs, the addition of a room, a complete tear down (must leave foundation) or rebuild. Standard 203k loans are also for repair costs that exceed $35k regardless of the type of repair. A minimum of $5,000 in eligible repairs is required, from upgrading appliances to major renovations (no luxury improvements, like pools or landscaping are allowed).

Limited FHA 203k Loans

Limited loans are for houses that need non-structural repairs, like painting, purchasing new appliances, kitchen and bathroom remodel, flooring, and air-conditioning systems.

Who Can Benefit From FHA 203K Loans

  • Homebuyers looking to take advantage of a low price on a home in need of repair or remodeling/updating
  • Homebuyers hoping to expand or update a property to meet their needs
  • Current Homeowners wanting to make improvements or upgrades to meet their family’s needs and increase their home’s value

What are the benefits of FHA 203k Loans?

  • One loan, closing, and payment for both the mortgage to purchase or refinance the home and the funds needed for improvements.
  • Improvement funds are held in an interest-earning escrow account and disbursed as the work is completed. On a limited, 50% is paid out to contractor 5 days after loan closing.
  • Can finance up to six months of mortgage payments into the loan if the home is determined to be uninhabitable during renovations, only on a Standard 203k.

Fannie Mae HomeStyle Renovation Program

On Q’s Fannie Mae HomeStyle Renovation Program is a great option for those looking to purchase that home that needs repairs or additions to become a dream home! Some requirements for the HomeStyle Loan Program include:

  • 15 and 30 year fixed-rate options
  • Down payments as low as 3% on a 1- unit primary residence
  • Down payments as low as 10% on a second home
  • Primary, Second Home, and Investment Properties
  • Renovation financing can total up to 75% of the as-completed value of the property
  • Purchase and rate-and-term refinance options available
  • FICO scores as low as 620

In Conclusion

This home improvement loan program may open up a lot of doors for would-be homeowners by allowing more options that you had previously not considered.

These loans aren’t just restricted to purchase transactions either, if you’re looking to refinance your home this could be a great option as well. Instead of moving on from a home that needs too many repairs it could be an excellent alternative to refinance and have those repairs financed into your new loan.

You don’t have to give up on the home you love even if it needs some improvements!