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Buy any home and renovate it before you move in
In a Seller’s market, inventory of homes for sale is low with the demand for housing high. Buyers often find themselves taking a long time to find their perfect home and most of the time, settle on a place due to convenience. I firmly believe that in our modern world, you shouldn’t need to “settle” for anything. Renovation loans can help you create the perfect home you want.
There are two main types of renovation loans. The Homestyle renovation loan is a conventional product while the 203k renovation loan is the FHA product. Both are very similar in what you can and cannot include.
At the basic level, you can do anything from a facelift or façade rehab to adding square footage or even a garage. Remodel a kitchen, bathroom, living room, flooring, paint, windows, you name it, it can get done. Adding a pool and/or an outdoor BBQ can only be done with the conventional product. Provided you can qualify for the loan, you can use your imagination for your project. Check out a before and after of this bathroom.
Photo Courtesy of NXS Remodeling
What is the down payment?
You might be surprised to find out the minimum down payment requirement is no different that a typical FHA or conventional loan. You’ll need 3.5% of the total cost of the home plus the project on FHA and 5% for conventional. See the example below:
Conventional Loan Homestyle Renovation
Purchase Price: $300,000
Renovation Budget: $50,000
Total cost: $350,000 X 5%
Down Payment needed: $17,500
How do you qualify for the loan?
Qualifying for the renovation program is no different than qualifying for a traditional loan. How you shop for a home may differ because you cannot max out your budget on the purchase of the home. But remember, in a Seller’s market, you now open more possibilities with homes if you know you intend to put your own personal touches into the home after the sale. More on this concept in another Blog Post.
What’s the catch?
There are a couple requirements you must consider. Virtually any home can qualify for FHA or Conventional financing through this program. Missing electrical, old plumbing, holes in walls, crumbling stucco? YES, it can be done with this program. But, there is no “self-help” allowed which means you will need a Contractor who is licensed, bonded, & insured. They can be either a General Contractor or Sub-Contractor, depending on the scope of work.
It’s very important to speak with a Loan Officer prior to committing to this loan program. There are many moving pieces and the lender, Realtor, and Contractor should be on the same page. Don’t worry, that’s our job! But it helps to have these professions lined up prior to making an offer.
How do I get started?
This program is not just limited to purchases. You can refinance your existing home using this program if you are tight on equity for a HELOC or if you are in the middle of a gut job and need to fix your place ASAP. This introduction to a renovation loan might be your solution for creating the perfect home vs settling because you had no choice. Give us a call today for a free review to see if this is something for you.