Renovation Loans

What is a Renovation loan?  

A renovation loan is a type of financing that helps homeowners fund the cost of repairs or improvements to their property without using their personal savings. These loans can be used for a variety of projects such as remodeling a kitchen, adding living space to a basement, or adding on a room addition. The renovation loan can also be used to purchase a fixer-upper and roll the renovations into one loan. You can essentially turn any home into your “Dream Home”!

Benefits of a Renovation Loan:

• Low down payment fixed rate mortgage

• Low fico score requirements 

• Roll all renovations into the loan 

• Up to 9 months of mortgage payment scan be rolled into the loan while the home is under construction 

• Most repairs and updates can be done with these loan 

• We lend on the “after repair value” 

Types of Renovation Loans

There are different types of renovation loans, including:  

1. FHA 203(k) Loan: Backed by the Federal Housing Administration (FHA), this loan allows borrowers to purchase a home and include renovation costs in the same mortgage. There are two types: the Standard 203(k) for major renovations and the Limited 203(k) for smaller projects.

2. HomeStyle Renovation Loan: Offered by Fannie Mae, this loan allows you to finance the cost of home improvements as part of your mortgage. It can be used for a wide range of renovations and is available for both purchases and refinancing.

3. VA Renovation Loan: For veterans and active-duty service members, this loan allows for home improvements as part of a VA-backed mortgage. It combines the benefits of a VA loan with renovation financing.

 4. Renovation (HELOC) Home Equity Line of Credit: A Renovation HELOC lets you borrow against the equity in your home to finance renovations. This special HELOC takes into consideration the future value of the property whereas most HELOCS will only consider your home’s current value. It typically has a variable interest rate and works like a credit card with a line of credit that you can draw from as needed

5. Investor Short-Term Loans (Fix & Flip or Buy & Hold) 

Renovation loans generally require a detailed plan of the work to be done and often involve an appraisal to determine the projected value of the home after renovations.