There are so many reasons to consider home renovations. You may be a homeowner who needs to update the home that you bought a decade ago so that it’s a better fit for the life that your family leads now. Or, you might have inherited a home from a family member or friend, and you want to remodel it before you either move in or put it on the market. On the flip side, you might be a homebuyer who has fallen in love with a fixer-upper because you want to put your own stamp on a place or because you appreciate the chance to get a great deal. When it comes to fixing up a fixer-upper, you’ll need more than elbow grease. You’ll need funds. Can you get a mortgage to renovate a house?
Can You Get a Mortgage to Renovate a House?
As NextAdvisor points out, you could break out your credit cards or take out a personal loan to finance renovations to your home. However, both options are likely to come with much higher interest rates than a home loan, so neither is a great choice for a sizeable project. Can you get a mortgage to renovate a house? You can. In fact, opting for a renovation loan can have real advantages. As PrimeLending indicates, if you choose wisely, you can get one loan that will cover both the purchase or refinance amount and your renovation costs while completing one loan application, going through one closing, and setting up just one mortgage payment each month. Plus, the renovation work can start as soon as your closing is completed. What options are out there?
The EZ “C”onventional” is used in conjunction with conventional mortgages to fund cosmetic, non-structural home repairs that add value to the property. It can cover both appraiser-required and borrower-requested renovations. Would you like to update a kitchen or bathroom or freshen up the master bedroom? If you’re planning to use a conventional loan, then the EZ “C”onventional could be a good choice.
VA Renovation Home Loan
If you’re eligible for a VA loan, you might want to check out the VA renovation home loan. It’s a chance to secure a single loan that lets you buy or refinance and renovate a home while enjoying 100-percent financing, a great interest rate, and no mortgage insurance requirement. How does it work? You get itemized improvement quotes from a contractor. A VA appraiser reviews them and makes a determination about the home’s future value, which is considered the as-completed value. Then, you’re free to borrow up to the lesser of either the purchase price or the as-completed value. However, there are some limits on what you can do. Repair costs cannot exceed $50,000. You are allowed to improve the existing structure, but you cannot gut it and start over, add onto it, or make purely aesthetic changes.
FHA 203(k) Loan
Backed by the Federal Housing Administration, FHA 203(k) loans are designed to fund the purchase or refinance of a property that’s in need of work and the planned renovations in one loan. There are actually two different versions of the FHA 203(k) loan. With the FHA 203(k) limited, you can borrow up to $35,000 for renovations, but you can’t make major structural changes. On the other hand, the FHA 203(k) standard requires that renovations cost at least $5,000, but it allows structural renovations. With either of these loans, you generally won’t be able to complete luxury renovations, but projects that improve the health, safety, functionality, attractiveness, or energy efficiency of the property are acceptable. Work must be done by a licensed contractor and is subject to the approval of an FHA appraiser.
Fannie Mae HomeStyle Renovation
Some renovation loans come with lots of dos and don’ts. The Fannie Mae HomeStyle Renovation gives you lots of flexibility. The property doesn’t have to be your primary residence, and it doesn’t have to be habitable. In fact, if you’ve got major construction work planned, you can include up to six months of principal, interest, taxes, and insurance in your renovation financing so that you can afford to live elsewhere while the work is completed. While you cannot tear down the existing structure and start completely over, you can do just about any other work that will be permanently affixed to the property.
Can you get a mortgage to renovate a house? Whether you’re eager to buy a new home or interested in refinancing, talk to the home loan experts at PrimeLending West Texas. They’ll be happy to help you explore your options and find the one that best fits your needs. Contact us today to get started.