When to Consider a Renovation Loan

When to Consider a Renovation Loan

Sometimes you find a great house, but it needs a little bit of TLC. That is where a renovation loan comes in to the picture. A renovation loan, or 203(k), makes the process easier by allowing you to combine your renovation costs into your mortgage, helping you fund your home improvements. That means one loan and one closing, and a lot less stress on you!

There are a few different types of renovation loans offered that help fund minor repairs to major rehabilitation. Take a look at the overview below and decide which one will help you complete your dream home.

Standard 203(k) Mortgage Program: Use this program if you are looking to do large scale renovations, remodeling and repairs, and when a 203(k) consultant is required.

  • No maximum repair cost amount, minimum $5,000 in eligible improvements required.
  • Renovating/Remodeling: converting a 1-family structure to a 2-4 family structure, alterations such as repair or replacement of structural damage, constructing a garage, creating accessibility for persons with disabilities.
  • Repairs: fixing HVAC systems, decks, patios, porches, well and/or septic systems.
  • Energy conservation improvements: adding insulation, replacing windows and doors, install energy efficient lighting.
  • Landscaping.
  • May not be used for luxury items that do not become a permanent part of the property: swimming pools and hot tubs, bath houses, outdoor fireplaces, gazebos.
  • Minimum down payment of 3.5% for purchases, 2.25% for rate/term refinances.
  • Owner-occupied property only.

Limited 203k Mortgage Program: This program may only be used for minor remodeling and non-structural repairs. A 203(k) consultant is not required, but may be used for the project.

  • Maximum repair cost $35,000.
  • Improve house function and modernization: installing a new refrigerator, cooktop, oven, dishwasher, and/or washer/dryer, installing smoke detectors.
  • Connecting to public water and sewage systems.
  • Installing or repairing fences, walkways, and driveways, repairing old or damaged siding, gutters and downspouts.
  • May not be used for luxury items that do not become a permanent part of the property: swimming pools and hot tubs, bath houses, outdoor fireplaces, gazebos.
  • Repairs and improvements are completed in 6 months or less.
  • Minimum down payment of 3.5% for purchases, 2.25% for rate/term refinances.
  • Owner-occupied property only.

Fannie Mae HomeStyle® Renovation Mortgage: There are no required improvements or restrictions on the types of renovations allowed.

  • No minimum dollar amount required for improvements, however, a HUD-approved consultant must be used when repairs and renovations exceed $15,000.
  • May be used to complete final work on a newly built home when the home is at least 90% complete, remaining improvements must be related to completing non-structural items such as installation of buyer-selected items (flooring, cabinets, kitchen appliances, fixtures, and trim, etc.).
  • May not be used for complete tear-down and reconstruction.
  • May be used to construct outdoor buildings and structures such as swimming pools, garages, recreation rooms and accessory units.
  • Repairs and improvements are completed in 6 months or less.
  • Minimum down payment is dependent upon transaction type (3-25% required).

 

Already own your home but need to make some updates and repairs? We also offer renovation loans for refinances.

 

Contact a First Home Loan Officer in your area to discuss which option best fits your needs.

 

 

HomeStyle® is a registered trademark of Fannie Mae.

Related Posts

Debunking 8 Common Condo Mortgage Myths
Debunking 8 Common Condo Mortgage Myths

Purchasing a condo is a significant decision that often comes with a host of myths and misconceptions. While condos can be an excellent choice for many buyers, these myths can lead to confusion and uncertainty. In this blog post, we aim to dispel common myths about condo purchases, helping you make an informed decision when […]

September 19, 2023
Full Post
Mastering Home Purchases: The Ultimate Guide to Escrow Holdbacks for Repairs
Mastering Home Purchases: The Ultimate Guide to Escrow Holdbacks for Repairs

Purchasing a home can be an exhilarating experience, but it can also come with its fair share of challenges, especially when it comes to addressing repairs and improvements. One powerful tool that can help streamline this process is the escrow holdback for repairs. In this comprehensive guide, we’ll dive into what an escrow holdback is, […]

September 13, 2023
Full Post
Navigating the Path to Homeownership as an Educator
Navigating the Path to Homeownership as an Educator

Teaching is a profession that shapes the future, one student at a time. It’s a calling driven by passion, dedication, and a deep commitment to education. However, for many educators, the dream of homeownership can sometimes seem like an elusive goal due to financial challenges. In this blog post, we will guide you through the […]

September 05, 2023
Full Post

Connect With Us