You have found an almost perfect home to buy or you want to make some updates to your home. Now what? When you can’t find the house that fits all the boxes, it’s time to consider renovating a home to make it fit all the boxes.
What is a renovation loan? A renovation loan allows you to customize the home you are buying or that you currently own. Some renovation loans are for primary residences only, others can be used for second home and investment properties. These can be used for large or small projects.
Two big plusses. A renovation loan allows you to finance your improvements at an interest rate that is lower than a credit card and it preserves your cash reserves.
A traditional home loans pay a lump sum at closing to buy a property or refinance your current loan. Renovation loans include the funding to pay for the renovations, so you only have one closing and one appraisal, saving time and money. You need to choose a reputable contractor that meets the lender’s requirements for licensing and insurance, plus you need to provide a budget for your improvements. Renovation loans do not allow for homeowner DIY participation.
There are a few different types of renovation loans. There is a conventional renovation loan, FHA has a 203K loan – both a limited 203K for smaller projects or a standard 203K. VA loans can be structured with a renovation loan.
Other options for renovation loans would be using a cash out refinance or a home equity loan to pay for the renovations. Talking to your loan officer is the best way to decide which loan is best for you.
For some people, a renovation loan allows you to buy the home you have wanted but not been able to find. Reach out if you have questions on renovation loans!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
